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Part II
Department of
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Federal Energy Regulatory Commission
sroberts on PROD1PC70 with PROPOSALS
18 CFR Part 40
Mandatory Reliability Standards for the
Bulk-Power System; Proposed Rule
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Federal Register / Vol. 71, No. 213 / Friday, November 3, 2006 / Proposed Rules
DEPARTMENT OF ENERGY
Federal Energy Regulatory
Commission
18 CFR Part 40
Docket No. RM06–16–000]
Mandatory Reliability Standards for the
Bulk-Power System
October 20, 2006.
AGENCY: Federal Energy Regulatory
Commission, DOE.
ACTION: Notice of proposed rulemaking.
SUMMARY: Pursuant to section 215 of the
Federal Power Act (FPA), the
Commission is proposing to approve 83
of 107 proposed Reliability Standards,
including six of the eight regional
differences, and the Glossary of Terms
Used in Reliability Standards developed
by the North American Electric
Reliability Council, on behalf of its
wholly-owned subsidiary, the North
American Electric Reliability
Corporation (NERC), which the
Commission has certified as the Electric
Reliability Organization (ERO)
responsible for developing and
enforcing mandatory Reliability
Standards. Those Reliability Standards
meet the requirements of section 215 of
the FPA and Part 39 of the
Commission’s regulations. However,
although we believe it is in the public
interest to make these Reliability
Standards mandatory and enforceable
by June 2007, we also find that much
work remains to be done. Specifically,
we believe that many of these Reliability
Standards require significant
improvement to address, among other
things, the recommendations of the
Blackout Report. We therefore propose,
pursuant to section 215(d)(5), to require
the ERO to make significant
improvements to many of the 83
Reliability Standards that are being
approved as mandatory and enforceable.
Appendix D provides a list of the
Reliability Standards that should be
given the highest priority when the ERO
undertakes to make these
improvements. With respect to the
remaining 24 Reliability Standards, the
Commission proposes that they remain
pending at the Commission until further
information is provided. The
Commission is not proposing to remand
any Reliability Standards.
The Commission proposes to amend
the text of its regulation to require that
each Reliability Standard identify the
subset of users, owners and operators to
which that particular Reliability
Standard applies. The Commission also
is proposing to amend its regulations to
require that each Reliability Standard
that is approved by the Commission will
be maintained in the Commission’s
Public Reference Room and on the
ERO’s Internet Web site for public
inspection.
DATES: Comments are due January 2,
2007.
ADDRESSES: You may submit comments,
identified by Docket No. RM06–16–000,
by one of the following methods:
• Agency Web site: http://ferc.gov.
Follow the instructions for submitting
comments via the eFiling link found in
the Comment Procedures section of the
Preamble.
• Mail: Commenters unable to file
comments electronically must mail or
hand deliver an original and 14 copies
of their comments to: Federal Energy
Regulatory Commission, Office of the
Secretary, 888 First Street. NE.,
Washington, DC 20426. Refer to the
Comment Procedures section of the
preamble for additional information on
how to file paper comments.
FOR FURTHER INFORMATION CONTACT:
Jonathan First (Legal Information),
Office of the General Counsel, Federal
Energy Regulatory Commission, 888
First Street, NE., Washington, DC
20426, (202) 502–8529.
Paul Silverman (Legal Information),
Office of the General Counsel, Federal
Energy Regulatory Commission, 888
First Street, NE., Washington, DC
20426, (202) 502–8683.
Robert Snow (Technical Information),
Office of Energy Markets and
Reliability, Division of Reliability,
Federal Energy Regulatory
Commission, 888 First Street, NE.,
Washington, DC 20426, (202) 502–
6716.
Kumar Agarwal (Technical
Information), Office of Energy Market
and Reliability, Division of Policy
Analysis and Rulemaking, Federal
Energy Regulatory Commission, 888
First Street, NE., Washington, DC
20426, (202) 502–8923.
SUPPLEMENTARY INFORMATION:
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Paragraph
Numbers
I. Introduction .........................................................................................................................................................................................
II. Background .........................................................................................................................................................................................
A. Voluntary Reliability Standards ................................................................................................................................................
B. EPAct 2005 and Order No. 672 .................................................................................................................................................
C. The Electric Reliability Organization ........................................................................................................................................
D. NERC Petition for Approval of Reliability Standards ..............................................................................................................
E. Staff Preliminary Assessment .....................................................................................................................................................
III. Discussion .........................................................................................................................................................................................
A. The Commission’s Reliability Standards Proposal ..................................................................................................................
1. Applicability ........................................................................................................................................................................
2. Mandatory Reliability Standards ........................................................................................................................................
3. Availability of Reliability Standards ..................................................................................................................................
B. Applicability Issues ....................................................................................................................................................................
1. Definition of User of the Bulk-Power System ....................................................................................................................
2. Use of the NERC Functional Model ....................................................................................................................................
3. Applicability to Small Entities ............................................................................................................................................
4. Regional Reliability Organizations ......................................................................................................................................
5. Bulk-Power System v. Bulk Electric System ......................................................................................................................
C. Mandatory Reliability Standards ...............................................................................................................................................
1. Legal Standard for Approval of Reliability Standards ......................................................................................................
2. Commission Options When Acting on a Reliability Standard .........................................................................................
3. Prioritizing Modifications to Reliability Standards ...........................................................................................................
4. Trial Period ..........................................................................................................................................................................
5. International Coordination of Remands .............................................................................................................................
D. Common Issues Pertaining to Reliability Standards ................................................................................................................
1. Blackout Report Recommendations ....................................................................................................................................
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Federal Register / Vol. 71, No. 213 / Friday, November 3, 2006 / Proposed Rules
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Paragraph
Numbers
2. Measures and Levels of Non-Compliance ..........................................................................................................................
3. Ambiguities and Potential Multiple Interpretations ..........................................................................................................
4. Technical Adequacy ............................................................................................................................................................
5. Fill-in-the-Blank Standards .................................................................................................................................................
E. Discussion of Each Individual Reliability Standard .................................................................................................................
1. BAL: Resource and Demand Balancing ..............................................................................................................................
2. CIP: Critical Infrastructure Protection ................................................................................................................................
3. COM: Communications .......................................................................................................................................................
4. EOP: Emergency Preparedness and Operations .................................................................................................................
5. FAC: Facilities Design, Connections, Maintenance, and Transfer Capabilities ...............................................................
6. INT: Interchange Scheduling and Coordination ................................................................................................................
7. IRO: Interconnection Reliability Operations and Coordination ........................................................................................
8. MOD: Modeling, Data, and Analysis ..................................................................................................................................
9. PER: Personnel Performance, Training and Qualifications ...............................................................................................
10. PRC: Protection and Control .............................................................................................................................................
11. TOP: Transmission Operations .........................................................................................................................................
12. TPL: Transmission Planning .............................................................................................................................................
13. VAR: Voltage and Reactive Control ..................................................................................................................................
14. Glossary of Terms Used in Reliability Standards ............................................................................................................
IV. Information Collection Statement ...................................................................................................................................................
V. Environmental Analysis ....................................................................................................................................................................
VI. Regulatory Flexibility Act Certification ..........................................................................................................................................
VII. Comment Procedures ......................................................................................................................................................................
VIII. Document Availability ...................................................................................................................................................................
103
108
113
116
124
125
217
232
263
343
427
497
588
749
802
951
1037
1129
1151
1157
1171
1172
1177
1179
Appendix A: Proposed Disposition of Standards, Glossary and Regional Differences
Appendix B: Commenters on Staff Preliminary Assessment
Appendix C: Abbreviations in this Document
Appendix D: High Priority List
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I. Introduction
1. Pursuant to section 215 of the
Federal Power Act (FPA), the
Commission is proposing to approve 83
of 107 proposed Reliability Standards,
including six of the eight regional
differences, and the Glossary of Terms
Used in Reliability Standards (glossary)
developed by the North American
Electric Reliability Council, on behalf of
its wholly-owned subsidiary, the North
American Electric Reliability
Corporation (NERC), which the
Commission has certified as the Electric
Reliability Organization (ERO)
responsible for developing and
enforcing mandatory Reliability
Standards. Those Reliability Standards
meet the requirements of section 215 of
the FPA and Part 39 of the
Commission’s regulations. However,
although we believe it is in the public
interest to make these Reliability
Standards mandatory and enforceable
by June 2007, we also find that much
work remains to be done. Specifically,
we believe that many of these Reliability
Standards require significant
improvement to address, among other
things, the recommendations of the
Blackout Report. We therefore propose,
pursuant to section 215(d)(5), to require
the ERO to make significant
improvements to many of the 83
Reliability Standards that are being
approved as mandatory and enforceable.
Appendix D provides a list of the
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Reliability Standards that should be
given the highest priority when the ERO
undertakes to make these
improvements. With respect to the
remaining 24 Reliability Standards, the
Commission proposes that they remain
pending at the Commission until further
information is provided. The
Commission is not proposing to remand
any Reliability Standards.
2. The Commission proposes to
amend the text of its regulations to
require that each Reliability Standard
identify the subset of users, owners, and
operators to which that particular
Reliability Standard applies. The
Commission also is proposing to amend
its regulations to require that each
Reliability Standard that is approved by
the Commission will be maintained in
the Commission’s Public Reference
Room and on the ERO’s Internet Web
site for public inspection.
3. On August 8, 2005, The Electricity
Modernization Act of 2005, which is
Title XII of the Energy Policy Act of
2005 (EPAct 2005), was enacted into
law.1 EPAct 2005 adds a new section
215 to the FPA, which requires a
Commission-certified ERO to develop
mandatory and enforceable Reliability
Standards, which are subject to
Commission review and approval. Once
approved, the Reliability Standards may
1 The Energy Policy Act of 2005, Pub. L. No. 109–
58, Title XII, Subtitle A, 119 Stat. 594, 941 (2005),
to be codified at 16 U.S.C. 824o (2000).
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be enforced by the ERO, subject to
Commission oversight.
4. On February 3, 2006, the
Commission issued Order No. 672,
which implements section 215 of the
FPA and provides specific processes for
the certification of one entity as the
ERO, the development and approval of
mandatory Reliability Standards, and
the compliance with and enforcement of
approved Reliability Standards.2 On
April 4, 2006, NERC made two filings:
(1) An application for certification of
NERC Corporation as the ERO and (2) a
petition for Commission approval of 102
Reliability Standards, as well as eight
regional differences and a glossary of
terms.3 On July 20, 2006, the
Commission issued an order certifying
NERC Corporation as the ERO.4 This
rulemaking proceeding addresses
NERC’s submission of Reliability
Standards and represents the next
2 Rules Concerning Certification of the Electric
Reliability Organization; Procedures for the
Establishment, Approval and Enforcement of
Electric Reliability Standards, Order No. 672, 71 FR
8662 (February 17, 2006), FERC Stats. & Regs.
¶ 31,204 (2006), order on reh’g, Order No. 672–A,
71 FR 19814 (April 18, 2006), FERC Stats. & Regs.
¶ 31,212 (2006).
3 The April 4, 2006 filing contained 102
Reliability Standards, a Glossary of Terms Used in
Reliability Standards and eight regional differences.
On August 28, 2006, NERC filed an additional 19
Reliability Standards and withdrew three of the 102
Reliability Standards. Eleven of the nineteen
reliability Standards replace those filed on April 4,
2006.
4 ERO Certification Order, 116 FERC ¶ 61,062.
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significant step toward achieving the
statutory goal of mandatory and
enforceable Reliability Standards.
5. The ERO’s filing is comprehensive,
and represents a significant effort by
NERC, the industry representatives who
serve on NERC’s standards development
teams, and the entities that participate
in NERC’s Reliability Standards
development process. After the August
2003 cascading blackout that affected
large portions of the central and eastern
United States and Canada, NERC
revised many of the then-existing NERC
operating policies and planning
standards to provide greater clarity and
compliance guidance. These revised
standards (referred to as ‘‘Version 0’’
and ‘‘Version 1’’) were developed using
NERC’s American National Standards
Institute (ANSI)-accredited Reliability
Standards development process and are
what has been filed with the
Commission for approval.
6. The Commission believes that these
Reliability Standards will form a solid
foundation on which to develop and
maintain the reliability of the North
American Bulk-Power System. At the
same time, the Commission recognizes,
as does NERC,5 that the Version 0 and
Version 1 standards were developed as
an initial step in the transition to clear,
enforceable Reliability Standards. As
such, some technical, enforceability and
policy aspects of the 107 proposed
Reliability Standards submitted by the
ERO can, and should, be improved.
7. Therefore, in evaluating NERC’s
proposal, the Commission recognizes
that the Reliability Standards are in a
state of transition and that NERC has
ongoing plans to improve them. Thus, at
this juncture, we will approve a
proposed Reliability Standard that
needs clarification, improvement, or
strengthening, provided that we are
confident that it satisfies the statutory
requirement that a Reliability Standard
must be ‘‘just, reasonable, not unduly
discriminatory or preferential, and in
the public interest.’’ 6 Rather than
remanding an imperfect Reliability
Standard, the NOPR generally proposes
to approve such a Reliability Standard.
In addition, as a distinct action under
the statute, the Commission proposes to
direct that the ERO modify such a
Reliability Standard, pursuant to section
215(d)(5) of the FPA, to address the
identified issues or concerns. This
approach would allow the proposed
Reliability Standard to be enforceable
while the ERO develops any required
modifications.
6 16 U.S.C. 824o(d)(2).
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7 NERC Petition at 25.
8 See id. at 87–90.
9 The ERO is reminded when filling in these
blanks that a regional difference is generally
permitted when it is more stringent or when there
5 See NERC Petition at 69.
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8. The Commission believes that, for
this period of transition from a
voluntary to a mandatory system of
compliance, the above course of action
is appropriate when reviewing the
ERO’s first set of proposed Reliability
Standards. This action provides the
benefit that mandatory and enforceable
Reliability Standards will be in effect
prior to the summer of 2007, the next
anticipated peak season for the nation’s
Bulk-Power System. Critical to our
decision to propose to approve such
Reliability Standards is NERC’s
representation to the Commission that
approval of the existing Reliability
Standards ‘‘will reinforce the
importance of these standards and will
have an immediate positive benefit with
regard to the reliability performance of
all bulk power system owners, operator
and users * * *.’’ 7
9. Accordingly, the Commission
proposes to approve the Reliability
Standards based on recognizing this
period of transition, the importance of
making them mandatory before the
summer of 2007, and by giving due
weight to the technical expertise of the
ERO with the expectation that the
Reliability Standards will accomplish
the purpose represented to the
Commission by the ERO; and that they
will improve the reliability of the BulkPower System by proactively preventing
situations that can lead to blackouts. By
taking this approach, we believe that the
responsibility for the technical
adequacy of the proposed Reliability
Standards falls squarely on the ERO,
and we expect the ERO to monitor the
effectiveness of the proposed Reliability
Standards and inform us if any
Reliability Standard proves, in practice,
to be inadequate in protecting and
improving Bulk-Power System
reliability.
10. Further, the Commission proposes
to request additional information with
regard to 24 proposed Reliability
Standards. These proposed Reliability
Standards would not be approved or
remanded by the Commission until
further action is taken by the ERO. This
group of Reliability Standards includes
NERC’s so-called ‘‘fill-in-the-blank’’
standards that require regional
reliability organizations to develop—
and users, owners, or operators to
comply with—regional criteria.8 Until
the Commission receives this
supplemental information to fill in the
‘‘blanks’’ 9 and assurances that the
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processes to fill in the blanks satisfy our
procedural requirements, the
Commission is not in a position to
approve or remand such Reliability
Standards. Second, a proposed
Reliability Standard that would apply
only to regional reliability organizations
will not be approved or remanded until
the ERO identifies a user, owner or
operator of the Bulk-Power System as
the applicable entity.10
11. Although the proposed Reliability
Standards for which the Commission is
requesting additional information will
not be enforceable under section 215,
this does not mean that no standards
governing a particular matter are in
place. Rather, in the interim, though not
enforceable under section 215,
compliance with these Reliability
Standards would be expected as a
matter of good utility practice.
II. Background
A. Voluntary Reliability Standards
12. In the aftermath of the 1965
blackout in the northeast United States,
the electric utility industry established
NERC, a voluntary reliability
organization. Since its inception, NERC
has developed Operating Policies and
Planning Standards that provide
voluntary guidelines for operating and
planning the North American BulkPower System.
13. A common cause of the past three
major regional blackouts was violation
of NERC’s then existing Operating
Policies and Planning Standards. During
July and August 1996, the west coast of
the United States experienced two
cascading blackouts caused by
violations of voluntary Operating
Policies.11 In response to the outages,
the Secretary of Energy convened a task
force to advise the U.S. Department of
is a geographical/physical reason for the difference.
Consolidation of regional standards into a single
continent-wide standard should not result in a
lowest common denominator. Order No. 672 at P
291.
10 In addition, some of the proposed Reliability
Standards overlap with other Commission
regulatory initiatives. For example, in a recent
Notice of Proposed Rulemaking, the Commission
has proposed to direct public utilities, in
conjunction with NERC and the North American
Energy Standards Board to provide for greater
consistency in Available Transmission Capacity
(ATC) calculation. See Preventing Undue
Discrimination and Preference in Transmission
Service, 71 FR 32636 (June 6, 2006), 71 FR 39251
(July 12, 2006), FERC Stats. & Regs. ¶ 39,602 (May
19, 2006) (OATT Reform NOPR).
11 The Electric Power Outages in the Western
United States, July 2–3, 1996, at 76 (ftp://
www.nerc.com/pub/sys/all_updl/docs/pubs/
doerept.pdf) and WSCC Disturbance Report, for the
Power System Outage that Occurred on the Western
Interconnection August 10, 1996, at 4 (ftp://
www.nerc.com/pub/sys/all_updl/docs/pubs/
AUG10FIN.pdf).
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Energy (DOE) on issues needed to be
addressed to maintain the reliability of
the Bulk-Power System. In a September
1998 report, the task force
recommended, among other things, that
federal legislation should grant more
explicit authority for the Commission to
approve and oversee an organization
having responsibility for bulk-power
reliability standards.12 Further, the task
force recommended that such legislation
provide for Commission jurisdiction
over reliability of the Bulk-Power
System and Commission
implementation of mandatory,
enforceable reliability standards.
14. On August 14, 2003, a blackout
affected significant portions of the
Midwest and Northeast United States,
and Ontario, Canada. This blackout
affected an estimated 50 million people
and 61,800 megawatts of electric load. A
joint U.S.-Canada task force studied the
causes of the August 14, 2003 blackout
and determined that several entities
violated NERC’s then-effective
Operating Policies and Planning
Standards, and that several of the
standards contained ambiguities that
rendered the standards ineffective.
Those violations and ambiguities
directly contributed to the blackout.13
The joint task force, in its
recommendations to prevent or
minimize the scope of future blackouts,
identified the need for legislation to
make reliability standards mandatory
and enforceable, with penalties for noncompliance and identified specific
ambiguities within the standards that
should be corrected to make the
standards effective.14
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B. EPAct 2005 and Order No. 672
15. EPAct 2005 adds a new section
215 to the FPA, which provides for a
system of mandatory and enforceable
Reliability Standards. On February 3,
2006, the Commission issued Order No.
672, implementing section 215 of the
FPA.15 Pursuant to Order No. 672, the
Commission certified one organization,
12 Maintaining Reliability in a Competitive U.S.
Electricity Industry, Final Report of the Task Force
on Electric System Reliability, Secretary of Energy
Advisory Board, U.S. Department of Energy
(September 1998), at 25–27, 65–67.
13 The joint team, known as the U.S.-Canada
Power System Outage Task Force, issued a Final
Report on the August 14, 2003 Blackout in the
United States and Canada: Causes and
Recommendations (Blackout Report) on April 5,
2004, which presented an in-depth analysis of the
causes of the blackout and recommendations for
avoiding future blackouts.
14 See id. at 140–42.
15 Order No. 672, 71 FR 8662 (Feb. 17, 2006),
FERC Stats. & Regs. ¶ 31,204 (2006), order on reh’g,
Order No. 672–A, 71 FR 19814 (Apr. 18, 2006),
FERC Stats. & Regs. ¶ 31,212 (2006). Terms defined
in Order No. 672 are capitalized in this order.
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NERC, as the ERO. The ERO is required
to develop Reliability Standards, which
are subject to Commission review and
approval.16 Once approved, the
Reliability Standards may be enforced
by the ERO, subject to Commission
oversight.17 The Reliability Standards
will apply to users, owners and
operators of the Bulk-Power System.
The ERO must submit each proposed
Reliability Standard to the Commission
for approval.
16. Section 215(d)(2) of the FPA and
the Commission’s regulations provide
that the Commission may approve a
proposed Reliability Standard if it
determines that the proposal is just,
reasonable, not unduly discriminatory
or preferential, and in the public
interest. The Commission specified in
Order No. 672 certain general factors it
would consider when assessing whether
a particular Reliability Standard is just
and reasonable.18 According to this
guidance, a proposed Reliability
Standard must provide for the Reliable
Operation of Bulk-Power System
facilities and may impose a requirement
on any user, owner, or operator of such
facilities. It must be designed to achieve
a specified reliability goal and must
contain a technically sound means to
achieve this goal. The proposed
Reliability Standard should be clear and
unambiguous regarding what is required
and who is required to comply. The
possible consequences for violating a
proposed Reliability Standard should be
clear and understandable to those who
must comply. There should be a clear
criterion or measure of whether an
entity is in compliance with a proposed
Reliability Standard. While a proposed
Reliability Standard does not
necessarily need to reflect the optimal
method for achieving its reliability goal,
16 Section 215(a)(3) of the FPA defines the term
Reliability Standard to mean ‘‘a requirement,
approved by the Commission under this section, to
provide for reliable operation of the bulk-power
system. This term includes requirements for the
operation of existing bulk-power system facilities,
including cybersecurity protection, and the design
of planned additions or modifications to such
facilities to the extent necessary to provide for the
reliable operation of the bulk-power system, but the
term does not include any requirement to enlarge
such facilities or to construct new transmission
capacity or generation capacity.’’ 16 U.S.C.
824o(a)(3).
Section 215(a)(4) of the FPA defines the term
‘‘reliable operation’’ broadly to mean, ‘‘* * *
operating the elements of the bulk-power system
within equipment and electric system thermal,
voltage, and stability limits so that instability,
uncontrolled separation, or cascading failures of
such system will not occur as a result of a sudden
disturbance, including a cybersecurity incident, or
unanticipated failure of system elements.’’ 16
U.S.C. 824o(a)(4).
17 The Commission can independently enforce
Reliability Standards. 16 U.S.C. 824o(e)(3).
18 Order No. 672 at P 262, 321–337.
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a proposed Reliability Standard should
achieve its reliability goal effectively
and efficiently. A proposed Reliability
Standard must do more than simply
reflect stakeholder agreement or
consensus around the ‘‘lowest common
denominator.’’ It is important that the
Reliability Standards developed through
any consensus process be sufficient to
adequately protect Bulk-Power System
reliability.19
17. A proposed Reliability Standard
may take into account the size of the
entity that must comply and the costs of
implementation. However, the ERO
should not propose standards that
would achieve less than operational
excellence or otherwise be inadequate to
support Bulk-Power System reliability.
A proposed Reliability Standard should
be a single standard that applies across
the North American Bulk-Power System
to the maximum extent this is
achievable taking into account
geographic variations in grid
characteristics, terrain, weather, and
other factors. It should also account for
regional variations in the organizational
and corporate structures of transmission
owners and operators, variations in
generation fuel type and ownership
patterns, and regional variations in
market design if these affect the
proposed Reliability Standard. Finally, a
proposed Reliability Standard should
have no undue negative effect on
competition.20 Order No. 672 directs the
ERO to explain how the proposal
satisfies the factors the Commission
identified and how the ERO balances
any conflicting factors when seeking
approval of a proposed Reliability
Standard.21
18. Pursuant to section 215(d)(2) of
the FPA and section 39.5(c) of the
Commission’s regulations, the
Commission is required to give due
weight to the technical expertise of the
ERO with respect to the content of a
Reliability Standard or to a Regional
Entity organized on an Interconnectionwide basis with respect to a proposed
Reliability Standard or a proposed
modification to a Reliability Standard to
be applicable within that
Interconnection. However, the
Commission is not required to defer to
the ERO or a Regional Entity with
respect to the effect of a proposed
Reliability Standard or proposed
modification to a Reliability Standard
on competition.22
19. The Commission’s regulations
require the ERO to file with the
19 Order No. 672 at P 329.
20 Order No. 672 at P 332.
21 Id. at P 337.
22 18 CFR 39.5(c)(1), (3).
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Commission each new or modified
Reliability Standard that it proposes to
be made effective under section 215 of
the FPA. The filing must include a
concise statement of the basis and
purpose of the proposed Reliability
Standard, a summary of the Reliability
Standard development proceedings
conducted by either the ERO or
Regional Entity, together with a
summary of the ERO’s Reliability
Standard review proceedings, and a
demonstration that the proposed
Reliability Standard is just, reasonable,
not unduly discriminatory or
preferential, and in the public interest.23
20. The Commission will remand to
the ERO for further consideration a
proposed new or modified Reliability
Standard that the Commission
disapproves in whole or in part.24 When
remanding a Reliability Standard to the
ERO, the Commission may order a
deadline by which the ERO must submit
a proposed or modified Reliability
Standard.
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C. The Electric Reliability Organization
21. NERC is a New Jersey nonprofit
corporation with a membership
comprised of the eight regional
reliability councils covering the
contiguous 48 States, several provinces
in Canada and a portion of Baja
California Norte, Mexico. NERC has
operated as a voluntary, industrysponsored reliability organization
formed to ensure the reliability of the
North American Bulk-Power System.
22. NERC filed an application with
the Commission on April, 4, 2006
seeking certification as the ERO. NERC
stated that it expects NERC Council and
NERC Corp. to merge upon being
certified as the ERO by the Commission.
NERC Corp. will be the surviving entity
and will assume the assets and
liabilities of NERC Council.
23. In its July 20, 2006 order certifying
NERC as the ERO, the Commission
directed NERC to submit a compliance
filing incorporating various
clarifications and revisions to its bylaws
and rules of procedure. Among the
improvements the Commission has
directed NERC to undertake as the ERO
are changes to expedite the existing
process for developing new Reliability
Standards in response to a Commission
deadline to deal with an urgent
situation. The order also directs NERC
to modify its proposed pro forma
delegation agreement for delegating
23 18 CFR 39.5(a).
24 18 CFR 39.5(e).
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enforcement authority to a Regional
Entity.25
D. NERC Petition for Approval of
Reliability Standards
24. On April 4, 2006, as modified on
August 28, 2006 NERC submitted to the
Commission a petition seeking approval
of the 107 proposed Reliability
Standards that are the subject of this
NOPR (NERC Petition).26 NERC states
that 90 of these Reliability Standards,
known as ‘‘Version 0’’ standards,
became effective on a voluntary basis on
April 1, 2005. It explains that the
Version 0 standards ‘‘are a translation,
with certain improvements, of NERC’s
operating policies that were developed
over several decades and its planning
standards, which were approved in
September 1997.’’ 27 In addition, the
April 4, 2006 filing includes 12 new
Reliability Standards that were
approved by the NERC board of trustees
for implementation in February 2006.
According to NERC, the 107 proposed
Reliability Standards collectively define
overall acceptable performance with
regard to operation, planning and design
of the North American Bulk-Power
System. Seven of these Reliability
Standards specifically incorporate one
or more ‘‘regional differences’’ (which
can include an exemption from a
Reliability Standard) for a particular
region or subregion, resulting in eight
regional differences. NERC requests that
the Reliability Standards become
effective on January 1, 2007, or an
alternative date determined by the
Commission. NERC also states that it
simultaneously filed the proposed
Reliability Standards with governmental
authorities in Canada.
25. Each proposed Reliability
Standard follows a common format that
includes five organizational elements:
a. Introduction
1. Title: a phrase that describes the
topic of the Reliability Standard.
2. Number: A unique identification
number that starts with three letters to
identify the group followed by a dash
and a three digit number, followed by a
25 Although the ERO Certification Order directs
NERC to modify the pro forma delegation
agreement, the pro forma agreement will not be refiled with the Commission before negotiating the
individual delegation agreements. The pro forma
agreement will form the basis for the individual
Regional Entity delegation agreements that will be
filed with the Commission. ERO Certification
Order, 116 FERC ¶ 61,062 at P 518.
26 The filed proposed Reliability Standards are
not attached to this NOPR but are available on the
Commission’s eLibrary document retrieval system
in Docket No. RM06–16–000 and are available on
the ERO’s Web site, http://www.nerc.com/∼filez/
nerc_filings_ferc.html.
27 See NERC Petition at 28.
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dash and the version number e.g., PRC–
014–0.
3. Purpose: One or more sentences
that explicitly states the outcome to be
achieved by the adoption of the
Reliability Standard.
4. Applicability:
4.1 Each entity, as defined by the
NERC Functional Model, that must
comply with the Reliability Standard,
such as Transmission Owner.
b. Requirements
R1. A listing of explicitly stated
technical, performance and
preparedness requirements and who is
responsible for achieving them.
c. Measures
M1. A listing of the factors and the
process NERC will use to assess
performance and outcomes in order to
determine non-compliance, and who is
responsible for achieving the measures.
Measures are ‘‘the evidence that must be
presented to show compliance’’ with a
standard and ‘‘are not intended to
contain the quantitative metrics for
determining satisfactory
performance.’’ 28
d. Compliance
1. Compliance Monitoring Process
1.1 Compliance Monitoring
Responsibility: NERC’s explanation of
who is responsible for assessing
performance or outcomes.
1.2 Compliance Monitoring Period
and Reset Timeframe: The timeframe for
each compliance monitoring period
before it is reset for the next period.
1.3 Data Retention: How long
compliance documentation needs to
remain on file.
1.4 Additional Compliance
Information: Any other information
relating to compliance.
2. Levels of Non-Compliance: Usually
four levels of non-compliance are
identified, with level 1 being used for
the least severe non-compliance and
level 4 for the most severe noncompliance.
e. Regional Differences
Identification of any regional
differences that have been approved by
the applicable NERC Committee
(including Regions that are exempt).
Version History: The chronological
history of changes to the standard.
26. In its April 4, 2006 petition, NERC
requested ‘‘unconditional’’ approval of
77 proposed Reliability Standards and
the glossary of terms. Further, NERC
28 NERC Comments at 104. NERC clarified its
position that Measures did not include metrics after
the Staff Preliminary Assessment interpreted the
Measures section as including metrics.
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requested ‘‘conditional’’ approval of 25
proposed Reliability Standards.
27. In a June 26 filing, NERC revised
its recommended action on the
proposed Reliability Standards: (1)
Unconditional approval of 51 proposed
Reliability Standards, to become
enforceable in the U.S. on a date in 2007
to be determined by the Commission; (2)
conditional approval of 26 proposed
‘fill-in-the-blank’ Reliability Standards,
to become enforceable in the U.S. on a
date in 2007 to be determined by the
Commission. NERC recommends that
‘‘conditional approval’’ shall mean ‘‘that
any limitation of the standard caused by
the presence of a regional ‘fill-in-theblank’ requirement * * * would be
considered as a factor in the evaluation
of circumstances surrounding an alleged
violation of the standard and the
determination of a violation and setting
of an appropriate penalty;’’ and (3)
conditional approval of another 25
proposed Reliability Standards lacking
Measures or Levels of Non-Compliance,
to become enforceable in the U.S. on a
date in 2007 to be determined by the
Commission. In addition, NERC plans to
file modified Reliability Standards in
early November 2006 that will add
missing Measures and Levels of Noncompliance elements as well as risk
factors. NERC recommends that the
Commission act on the proposed
modifications to Reliability Standards
that are currently before the
Commission in the same proceeding to
achieve an initial set of Reliability
Standards.
28. On August 28, 2006, NERC
submitted 27 new and revised
standards. The Commission will address
these proposed new and revised
Reliability Standards in this rulemaking
proceeding, except for eight proposed
Reliability Standards that relate to cyber
security. Reliability Standards CIP–002
through CIP–009 will be addressed in a
separate rulemaking proceeding in
Docket No. RM06–22–000.
E. Staff Preliminary Assessment
29. On May 11, 2006, Commission
staff issued a ‘‘Staff Preliminary
Assessment of the North American
Electric Reliability Council’s Proposed
Mandatory Reliability Standards’’ (Staff
Preliminary Assessment). The Staff
Preliminary Assessment identified
staff’s preliminary observations and
concerns regarding NERC’s then-current
voluntary reliability standards. The Staff
Preliminary Assessment describes
issues common to a number of proposed
Reliability Standards. It reviewed and
identified issues regarding each
individual Reliability Standard but did
not make specific recommendations
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regarding the appropriate action on a
particular proposal.
30. The Staff Preliminary Assessment
provided a basis for soliciting input
regarding which of the proposed
Reliability Standards should be
approved, approved on an interim basis,
or remanded to the ERO; established a
platform from which to identify and
prioritize potential problems with the
proposed Reliability Standards; and
provided a comprehensive and objective
assessment of NERC’s then-current 102
Reliability Standards.
31. Comments on the Staff
Preliminary Assessment were due by
June 26, 2006. Entities that filed
comments are listed in Appendix A to
this NOPR. Approximately 50 persons
filed comments in response to the Staff
Preliminary Assessment. In addition, on
July 6, 2006, the Commission held a
technical conference to discuss NERC’s
proposed Reliability Standards, the Staff
Preliminary Assessment and other
related issues. The technical conference
was transcribed, and is a part of the
record in this docket.
32. The written comments as well as
the panel discussions at the technical
conference have been very informative,
and reference to the public comments is
mentioned throughout the NOPR.
Moreover, our proposed disposition of
the Reliability Standards reflects our
consideration of all comments that were
submitted.
III. Discussion
A. The Commission’s Reliability
Standards Proposal
33. The Commission’s proposed
reliability regulation is entitled
Mandatory Reliability Standards for the
Bulk-Power System. Section 215(b) of
the FPA obligates all users, owners and
operators of the Bulk-Power System to
comply with Reliability Standards that
become effective pursuant to the
processes set forth in the statute and in
Part 39 of the Commission’s regulations.
The complete text of the proposed rule
is provided in the Attachment to this
notice of proposed rulemaking.
34. The proposed regulation is
organized into three sections:
40.1—Applicability;
40.2—Mandatory Reliability
Standards; and
40.3—Availability of Reliability
Standards.
1. Applicability
35. Section 40.1(a) of the proposed
regulations provides that this Part
applies to all users, owners and
operators of the Bulk-Power System
within the United States (other than
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64775
Alaska and Hawaii) including, but not
limited to, the entities described in
section 201(f) of the FPA. This
statement is consistent with § 215(b) of
the FPA and section 39.2 of the
Commission’s regulations.
36. Section 40.1(b) requires each
Reliability Standard made effective
under this Part to identify the subset of
users, owners and operators to whom
that particular Reliability Standard
applies.
2. Mandatory Reliability Standards
37. Section 40.2 (a) of the proposed
regulations requires that each applicable
user, owner or operator of the BulkPower System comply with
Commission-approved Reliability
Standards developed by the ERO, and
provides that the Commission-approved
Reliability Standards can be obtained
from the Commission’s Public Reference
Room at 888 First Street, NE., Room 2A,
Washington, DC 20426.
38. Section 40.2(b) of the proposed
regulations provides that a proposed
modification to a Reliability Standard
proposed to become effective pursuant
to § 39.5 shall not be effective until
approved by the Commission.
3. Availability of Reliability Standards
39. Section 40.3 of the proposed
regulations would require that the ERO
maintain in electronic format that is
accessible from the Internet the
complete set of effective Reliability
Standards that have been developed by
the ERO and approved by the
Commission. The Commission believes
that ready access to an electronic
version of the effective Reliability
Standards will enhance transparency
and help avoid confusion as to which
Reliability Standards are mandatory and
enforceable. We note that NERC
currently maintains the existing,
voluntary reliability standards on the
NERC Web site.
40. While the NOPR discusses each
proposed Reliability Standard and
identifies the Commission’s proposed
disposition for each Reliability
Standard, neither the text nor the title
of an approved Reliability Standard
would be codified in the Commission’s
regulations. Rather, as indicated above,
each applicable user, owner or operator
of the Bulk-Power System would be
required to comply with Commissionapproved Reliability Standards that are
available in the Commission’s Public
Reference Room and on the Internet at
the ERO’s Web site.
41. This approach would preserve the
statutory options of approving a
proposed Reliability Standard or
modification to a Reliability Standard
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‘‘by rule or order.’’ 29 While we
anticipate that the Commission would
address through the rulemaking process
most, if not all, new Reliability
Standards proposed by NERC, certain
modifications may be appropriately
addressed by order.
B. Applicability Issues
1. Definition of User of the Bulk-Power
System
42. In Order No. 672, the Commission
acknowledged that, generally, a person
directly connected to the Bulk-Power
System selling, purchasing or
transmitting electric energy over the
Bulk-Power System is a ‘‘User of the
Bulk-Power System.’’ However, the
Commission declined to adopt a formal
definition, explaining that, ‘‘until we
have proposed Reliability Standards
before us, we will reserve further
judgment on whether a definition of
‘User of the Bulk-Power System’ is
appropriate or whether the decision of
who is a ‘User of the Bulk-Power
System’ should be made on a case-bycase basis.’’ 30
43. We do not propose a generic
definition of the term ‘‘User of the BulkPower System.’’ Rather, the Commission
will determine applicability on a
standard-by-standard basis.31 The
phrase ‘‘user, owner or operator of the
Bulk-Power System’’ as used in section
215(b) of the FPA indicates the scope of
the Commission’s authority with regard
to compliance with Reliability
Standards. The proposed regulations
would require that the ERO identify in
each proposed Reliability Standard the
specific subset of users, owners and
operators of the Bulk-Power System to
which the proposed Reliability Standard
would apply. In fact, this is NERC’s
current practice, and each of the 107
proposed Reliability Standards
submitted by NERC includes an
‘‘applicability’’ provision that identifies
the specific categories of applicable
entities based on NERC’s Functional
Model.32 Parties concerned that a
29 See 16 U.S.C. 824o(d)(2).
sroberts on PROD1PC70 with PROPOSALS
30 Order No. 672 at P 99.
31 Many of the proposed Reliability Standards
apply to reliability coordinators and balancing
authorities and other clearly appropriate entities.
We believe that such Reliability Standards do not
raise applicability issues. Thus, in our standard-bystandard analysis, the Commission’s silence as to
applicability issues means that it agrees with the
ERO’s proposed applicability of a Reliability
Standard.
32 See NERC Petition at 80–81. For information
regarding the Functional Model, see NERC
Reliability Functional Model, Function Definitions
and Responsibility Entities, Version 2, February 10,
2004. NERC is currently developing revisions to the
Functional Model (referred to as ‘‘Version 3’’) that,
among other things, changes the name of the
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proposed Reliability Standard would
apply more broadly than the statute
allows may raise their concern in the
context of the specific Reliability
Standard. We believe that this approach
provides sufficient notice regarding
which entities are ‘‘users of the BulkPower System’’ that must comply with
a specific Reliability Standard.
2. Use of the NERC Functional Model
44. As mentioned above, each
Reliability Standard proposed by the
ERO identifies entities to which the
Reliability Standard applies based on
the NERC Functional Model.33 The Staff
Preliminary Assessment observed that
the Functional Model omits the
categories of ‘‘users, owners and
operators,’’ and includes other
categories of entities that are not users,
owners or operators of the Bulk-Power
System.34
45. NERC states that, while the term
‘‘users, owners and operators’’ defines
the statutory applicability of the
Reliability Standards, the Functional
Model adds descriptive detail to
reliability functions so the applicability
of each Reliability Standard can be
clearly defined. NERC explains that
‘‘every entity class described in the
Reliability Functional Model performs
functions that are essential to the
reliability of the bulk power system.’’ 35
Several commenters concur with NERC
and suggest that the Commission
approve the Functional Model so that
future modifications would require
Commission approval. MISO and
Allegheny point to specific examples of
what they consider ambiguities in the
NERC Functional Model, primarily in
the context of applicability to RTO or
ISO functions.
46. The objective here is to make sure
that each Reliability Standard is
sufficiently clear with respect to
applicability and specifically identifies
each category of entities to which it
applies. The NERC Functional Model
reliability authority to ‘‘reliability coordinator’’ and
explains its role in ‘‘wide area’’ reliability oversight.
Both versions of the Functional Model are available
on NERC’s Web site at: http://www.nerc.com/∼filez/
functionalmodel.html.
33 The functional categories include: (1)
Reliability coordinator, (2) balancing authority, (3)
planning authority, (4) transmission planner, (5)
transmission operator, (6) transmission service
provider, (7) transmission owner, (8) resource
planner, (9) distribution provider, (10) generator
owner, (11) generator operator, (12) load-serving
entity, (13) purchasing-selling entity, (14)
compliance monitor. ERO Certification Order, 116
FERC ¶ 61,062, at n.247.
34 Staff Preliminary Assessment at 24.
35 NERC Comments at 96. In addition to its April
4, 2006, Petition, NERC filed comments in response
to the Staff Preliminary Assessment on June 26,
2006 (NERC Comments).
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represents a reasonable and practical
approach to determining the
applicability of a particular Reliability
Standard. This approach is consistent
with the ERO Certification Order, in
which the Commission, in the context of
addressing NERC’s proposed
compliance registry, found that ‘‘NERC’s
functional approach provides a
reasonable means to ensure that the
proper entities are registered and that
each knows which Commissionapproved Reliability Standard(s) are
applicable to it.’’ 36 Thus, we agree with
NERC that identifying specific
functional categories of entities that
comprise users, owners and operators of
the Bulk-Power System provides a
useful level of detail and appears to be
more practical than simply identifying
an applicable entity as a user, owner or
operator. Accordingly, we propose to
use the NERC functional model to
identify the applicable entities to which
each Reliability Standard applies.
47. We are mindful of the concerns of
certain commenters that the Functional
Model may contain ambiguities and add
or omit certain entities or functions.
Elsewhere in the NOPR we are
proposing to require NERC to
specifically address these concerns.37
Further we note that NERC’s Rules of
Procedure pertaining to the NERC
compliance registry provide that NERC
will notify an entity before it is formally
registered and allow an opportunity for
an entity to challenge its inclusion on
the compliance registry.38 This process
should resolve any specific disputes
that may arise.
48. Some commenters suggest that
any future modification to the
Functional Model could affect the
categories of entities that must comply
with a particular Reliability Standard,
without the benefit of the open,
stakeholder process required when the
ERO develops a modification to a
Reliability Standard. Because the
Functional Model is so closely linked
with applicability of the Reliability
Standards, the Commission proposes to
require the ERO to submit any future
modifications to the Functional Model
that may affect the applicability of the
Reliability Standards for Commission
approval.
3. Applicability to Small Entities
49. NERC indicates that a Reliability
Standard may identify limitations on
36 ERO Certification Order, 116 FERC ¶ 61,062, at
P 689.
37 For example, commenters’ concerns regarding
applicability to ISOs and RTOs are discussed in
detail in the chapter on proposed communications
Reliability Standards.
38 See NERC Rule of Procedure section 501.1.3.
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applicability based on electric facility
characteristics ‘‘such as generators with
a nameplate rating of 20 MW or greater,
or transmission facilities energized at
200 kV or greater.’’ 39 It explains that,
‘‘to ensure that the standards are
applied in a cost effective manner and
the applicability of the standards is
focused on entities having a material
impact on reliability of the bulk power
system, it is necessary in the future to
begin providing greater specificity in the
applicability section of the
standards.’’ 40 NERC, as the ERO,
indicates that it plans to develop a set
of guidelines on such limitations for the
standard drafting teams and to require
that a new Reliability Standard or a
modification to an existing Reliability
Standard, going forward, include this
degree of specificity.
50. A number of commenters advocate
that a mandatory Reliability Standard
should not apply to entities that have no
‘‘material impact’’ on the Bulk-Power
System.41 These commenters also ask
that the Commission encourage and
facilitate contractual arrangements for
the delegation of compliance obligations
faced by small entities to Joint Action
Agencies (JAAs) and other organizations
that have ongoing relationships with
NERC.
51. While NERC has yet to submit a
specific proposal, the Commission
agrees that it is important to examine
the impact a particular entity may have
on the Bulk-Power System in
determining the applicability of a
specific Reliability Standard. However,
we do not believe that a ‘‘blanket
waiver’’ approach that would exempt
entities below a threshold level from
compliance with all Reliability
Standards would be appropriate because
there may be instances where a small
entity’s compliance is critical to
reliability. For instance, the reporting of
a sabotage event required by CIP–001–
0 may be important regardless of the
size of the entity since such reporting
helps others by putting them on notice
of potential attacks to their own
systems. For purposes of assessing
compliance with a particular Reliability
Standard, it may be appropriate to
differentiate among certain subsets of
users, owners, and operators. For
example, the requirement to have
adequate communications capabilities
to address real-time emergency
conditions (COM–001–0 and COM–
002–1) may be necessary for all
applicable entities regardless of size or
role, although we understand that the
39 NERC Petition at 9.
40 Id. at 82.
41 See, e.g., Alcoa, APPA, BPA and TAPS.
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implementation of these requirements
for applicable entities may vary based
on size or role.42 Therefore, we propose
to direct NERC to take such factors into
account in determining applicability, as
well as compliance requirements, for a
particular Reliability Standard.
52. In addition, the Commission
solicits comment on whether, despite
the existence of a threshold in a
particular standard (e.g., generators with
a nameplate rating of 20 MW or over),
the ERO or a Regional Entity should be
permitted to include an otherwise
exempt facility, e.g., a 15 MW generator,
on a facility-by-facility basis, if it
determines that the facility is needed for
Bulk-Power System reliability. If so,
what if any process should the ERO or
Regional Entity provide when making
such a determination?
53. NERC has proposed registration of
joint action agencies or similar
organizations that would register on
behalf of their members. APPA asks that
NERC permit a joint action agency or
similar organization to accept
compliance responsibilities on a
standard-by-standard basis. We propose
to direct NERC to develop procedures
which permit a joint action agency or
similar organization to accept
compliance responsibility on behalf of
their members.
4. Regional Reliability Organizations
54. NERC has proposed 28 Reliability
Standards that would apply, in whole or
in part, to a regional reliability
organization.43 Many of the 28
Reliability Standards concern such
matters as data gathering, data base
maintenance, preparation of
assessments and other ‘‘process’’ related
responsibilities. Others are what have
been referred to as ‘‘fill-in-the-blank’’
Reliability Standards. Many of the
proposed Reliability Standards that
have compliance measures refer to the
regional reliability organization as a
compliance monitor.
42 For example, a dedicated phone line that
would remain operative during a power failure may
suffice for a small cooperative with minimal BulkPower System facilities, while a large investorowned utility may need a sophisticated
communication system with redundancy and
diverse routing requirements.
43 NERC states that the regional reliability
organizations are the same as the existing eight
regional reliability councils and that ‘‘a regional
reliability organization may or may not be the same
organization that is providing statutory functions
delegated by agreement with a regional entity.’’
NERC Comments at 101. In the order certifying
NERC as the ERO, the Commission asked that NERC
provide additional information regarding the
possible ongoing role of the regional reliability
organizations and their relationship with Regional
Entities. ERO Certification Order, 116 FERC
¶ 61,062, at P 76.
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55. The Staff Preliminary Assessment
expressed concern as to whether a
Reliability Standard that applies to a
regional reliability organization is
enforceable pursuant to section 215(e) of
the FPA, since it is not clear whether a
regional reliability organization is a
user, owner or operator of the BulkPower System. NERC contends that
such Reliability Standards are
enforceable, and identifies several legal
theories to support its position.
Specifically, NERC contends that such
Reliability Standards are enforceable
because: (1) Each regional reliability
organization will voluntarily register as
a member of NERC and thereby be
bound to comply; 44 (2) a regional
reliability organization performs
functions on behalf of its members that
are users, owners and operators of the
Bulk-Power System; and (3) NERC is in
the process of updating its functional
model to provide a functional
description of a regional reliability
organization that includes functions that
NERC believes are consistent with a
system operator. EEI and other
commenters question whether a
Reliability Standard can be enforced
against a regional reliability
organization.
56. The Commission is not persuaded
that a regional reliability organization’s
compliance with a Reliability Standard
can be enforced as proposed by NERC.
Section 215 of the FPA does not appear
to recognize a regional reliability
organization as a user, owner or
operator of the Bulk-Power System.
Moreover, NERC’s arguments assume
that each regional reliability
organization will voluntarily join as a
member of NERC and be legally bound
as a member to comply. Further, NERC’s
claim that a regional reliability
organization will perform functions on
behalf of its members that are users,
owners and operators of the Bulk-Power
System does not establish a binding
agency relationship that would create a
legal basis for requiring regional
reliability organization compliance with
Reliability Standards. While it is
important that the existing regional
reliability organizations continue to
fulfill their current roles during the
transition to a regime where Reliability
Standards are mandatory and
enforceable, we do not understand why,
once the transition is complete, a
regional reliability organization should
play a role separate from a Regional
Entity whose function and
44 Pursuant to NERC’s ERO application, a member
‘‘accepts the responsibility to promote, support, and
comply with the Bylaws, Rules of Procedure, and
Reliability Standards * * *.’’
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responsibility is explicitly recognized
by section 215 of the FPA. We seek
comment on whether there is any need
to maintain separate roles for regional
reliability organizations with regard to
establishing and enforcing Reliability
Standards under section 215.
57. At present, 28 of the proposed
Reliability Standards are written to
apply solely or partially to regional
reliability organizations.45 We do not
believe it is necessary or useful to
remand those Reliability Standards
simply because they refer to the regional
reliability organization. For the five
standards that apply partially to
regional reliability organizations, the
Commission proposes action similar to
other Reliability Standards that need
improvement, i.e., to approve them and
direct modification.46 For the other
Reliability Standards, as an interim
measure, we propose to direct the ERO
to use its authority pursuant to § 39.2(d)
of our regulations to require users,
owners, and operators to provide to the
regional reliability organizations the
information 47 related to data gathering,
data maintenance, reliability
assessments and other ‘‘process’’-type
functions.48 We believe that this
approach is necessary to ensure that
there will be no ‘‘gap’’ during the
transition from the current voluntary
reliability model to a mandatory system
in which Reliability Standards are
enforced by the ERO and Regional
Entities. In the long run, we propose to
make the Regional Entities responsible,
through delegation by the ERO, for the
functions currently performed by the
regional reliability organizations. As
part of this change, the delegation
agreements to the Regional Entities
should be modified to bind the Regional
Entities to assume these duties and
responsibility for noncompliance. In
addition, the Reliability Standards
should be modified to apply through the
Functional Model, to the users, owners
and operators of the Bulk-Power System
that are responsible for providing
information.
58. Further, the Commission proposes
to require that any Reliability Standard
45 BAL–002, EOP–004, EOP–007, FAC–003, IRO–
001, MOD–001, MOD–002, MOD–003, MOD–004,
MOD–005, MOD–008, MOD–009, MOD–011, MOD–
013, MOD–014, MOD–015, MOD–016, MOD–024,
MOD–025, PRC–002, PRC–003, PRC–006, PRC–012,
PRC–013, PRC–014, PRC–020, TPL–005, and TPL–
006.
46 BAL–002, EOP–004, FAC–003, IRO–001, and
MOD–016. Three of these (EOP–004, FAC–003 and
MOD–016) are ‘‘data-gathering’’ or ‘‘process-type’’
Reliability Standards.
47 EOP–007, MOD–011, MOD–013, MOD–014,
MOD–015, MOD–024, MOD–025, PRC–002, PRC–
003, PRC–006, PRC–012, PRC–013, PRC–014, PRC–
020, TPL–005, and TPL–006.
48 18 CFR 39.2(d).
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that references a regional reliability
organization as a compliance monitor be
modified to refer to the ERO as the
compliance monitor.
59. Finally, for the remaining seven
Reliability Standards (fill-in-the-blank
standards),49 we propose to request
additional information on these
proposed Reliability Standards pending
receipt of additional information, as
detailed below in the discussion on fillin-the-blank standards.
5. Bulk-Power System v. Bulk Electric
System
60. As noted above, Commissionapproved Reliability Standards are to
provide for the Reliable Operation of the
Bulk-Power System. Generally speaking,
the Nation’s Bulk-Power System has
been described as consisting of
‘‘generating units, transmission lines
and substations, and system
controls.’’ 50 The transmission system
component of the Bulk-Power System is
understood to provide for the movement
of power in bulk to points of
distribution for allocation to retail
electricity customers. Essentially,
whereas transmission lines and other
parts of the transmission system,
including control facilities serve to
transmit electricity in bulk form from
the generation sources to concentrated
areas of retail customers, the
distribution system moves the
electricity to where these retail
customers consume it at a home or
business.
61. Section 215(b)(1) of the FPA
provides that all users, owners and
operators of the Bulk-Power System
must comply with Commissionapproved Reliability Standards. For
purposes of section 215, the statute
defines ‘‘Bulk-Power System’’ to mean:
(A) Facilities and control systems
necessary for operating an interconnected
electric energy transmission network (or any
portion thereof); and (B) electric energy from
generating facilities needed to maintain
transmission system reliability. The term
does not include facilities used in the local
distribution of electric energy.51
62. Notably, the statutory definition of
Bulk-Power System does not establish
voltage threshold limits on applicable
transmission facilities or electric energy
from generating facilities. It does,
however explicitly exclude facilities
used in the local distribution of
49 MOD–001, MOD–002, MOD–003, MOD–004,
MOD–005, MOD–008, and MOD–009.
50 Maintaining Reliability in a Competitive U.S.
Electricity Industry, Final Report of the Task Force
on Electric System Reliability, Secretary of Energy
Advisory Board, U.S. Department of Energy
(September 1998) at 2, 6–7.
51 16 U.S.C. 824o(a)(1).
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electricity. The NERC glossary, in
contrast, states that Reliability
Standards apply to the ‘‘bulk electric
system,’’ which is defined in terms of a
voltage threshold, as follows:
As defined by the Regional Reliability
Organization, the electrical generation
resources, transmission lines,
interconnections with neighboring systems,
and associated equipment, generally operated
at voltages of 100 kV or higher. Radial
transmission facilities serving only load with
one transmission source are generally not
included in this definition.52
63. While NERC’s definition generally
excludes transmission facilities
operated below 100 kV, NERC allows
each regional reliability organization to
add specificity to this general
obligation.
64. The Staff Preliminary Assessment
expressed concern that differences
between the statutory definition of BulkPower System and NERC’s definition of
bulk electric system create a
discrepancy that could result in
reliability gaps.53 Staff also expressed
concern that allowing a regional
reliability organization to define what
facilities are included in the bulk
electric system could result in
conflicting definitions—potentially
subjecting or excluding similar facilities
from compliance with the Reliability
Standards.
65. NERC recommends that, for the
initial approval of proposed Reliability
Standards, the continued use of NERC’s
definition of Bulk Electric System is
appropriate. In the longer term, NERC
suggests that change may be appropriate
but that any global change at this
juncture will affect many Reliability
Standards and is best achieved through
the Reliability Standards development
process. Some commenters emphasize
that all facilities necessary for BulkPower System reliability must be
covered by the Reliability Standards,
and none should be omitted by a
discretionary act of a regional reliability
organization. Many commenters,
however, state that these excluded
transmission systems have not been the
cause of any of the large blackouts and
therefore should not be considered as
part of the Bulk-Power System.54
52 See NERC Petition, Exhibit A, NERC glossary
at 2.
53 Staff Preliminary Assessment at 25–26. For
example, the two 230 kV cables that connect
Mirant’s Potomac River Plant and the 69 kV
transmission facilities that supply portions of
Washington, DC were not included in the MAAC
definition of bulk electric system. New York City’s
138 kV system is not included in NPCC’s definition
of bulk electric system.
54 Staff review of selected Form No. 1 reports filed
with the Commission indicates that 25 percent or
more of many public utilities’ total transmission
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Furthermore, some commenters,
including those representing small
transmission owners, prefer the
continued use of the NERC definition
and caution against simply replacing all
references to bulk electric system with
Bulk-Power System because (1) the
latter term as defined in section 215 of
the FPA is ambiguous and (2) it would
likely lead to an unintended substantive
change in various Reliability Standards.
66. We believe that Congress intended
that the definitions of Bulk-Power
System and Reliable Operation 55 in
section 215 of the FPA to further the
objective of maintaining the reliability
of the entire Bulk-Power System,
including maintaining the reliability of
all of the elements of the transmission
component of the Bulk-Power System.
We believe that the transmission
elements excluded under NERC’s bulk
electric system approach, including
transmission that serves critical load
centers, are subject to the Commission’s
jurisdiction under section 215.
67. The term Bulk-Power System as
defined in section 215 of the FPA is one
determinant of the Commission’s
jurisdiction for reliability purposes (the
phrase ‘‘user, owner or operator’’ being
another). While we do not believe that
it is appropriate to categorically exclude
any class of facilities from the definition
of Bulk-Power System, we recognize
that a particular Reliability Standard
may appropriately only need to apply to
a subset of facilities that comprise the
Bulk-Power System. Thus, the
Commission may approve a Reliability
Standard that applies to the bulk
electric system as defined by NERC
without limiting the ability of the ERO
to develop and propose standards
applicable to the broader set of facilities
encompassed by the statutory definition
as may be necessary.
68. The Commission believes that the
ERO has suggested a sensible transition
approach. The Commission proposes
that, for the initial approval of proposed
line miles operate below 100 kV. Yet such facilities
may well be as much a part of an entity’s portion
of the nation’s integrated transmission system
component of the Bulk-Power System as the
transmission facilities operating at or above 100 kV
because these lower voltage facilities support the
higher voltage facilities. Indeed, it is not unusual
to see outages of 69 kV transmission facilities
limiting the higher voltage transmission facilities
with which they are networked.
55 As mentioned earlier, ‘‘Reliable Operation
means operating the elements of the Bulk-Power
System within equipment and electric system
thermal, voltage, and stability limits so that
instability, uncontrolled separation, or cascading
failures of such system will not occur as a result
of sudden disturbance, including a Cybersecurity
Incident, or unanticipated failure of system
elements.’’ See Order No. 672 at P 64. See also 18
CFR 39.1.
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Reliability Standards, the continued use
of NERC’s definition of bulk electric
system as set forth in the NERC glossary
is appropriate.56 However, we interpret
the term ‘‘bulk electric system’’ to apply
to all of the ≥ 100 kV transmission
systems and any underlying
transmission system (< 100 kV) that
could limit or supplement the operation
of the higher voltage transmission
systems. It would also include
transmission to all significant local
distribution systems (but not the
distribution system itself), load centers,
and transmission connecting generation
that supplies electric energy to the
system. If there is a question concerning
which underlying transmission system
limits or supplements the operation of
the higher voltage transmission system,
the Commission proposed that the ERO
would provide the final determination
on a case by case basis.
69. Continued reliance on multiple
regional interpretations of the NERC
definition of bulk electric system, which
omits significant portions of the
transmission system component of the
Bulk-Power System that serve critical
load centers, is not appropriate. We
propose that NERC eventually revise the
current definition of bulk electric
system to ensure that all facilities,
control systems, and electric energy
from generation resources that impact
system reliability are included within
the scope of applicability, and that
NERC’s revision is consistent with the
statutory term Bulk-Power System.
70. While the approach outlined
above may result initially in a
Reliability Standard applying to a set of
Bulk-Power System facilities that is less
than that of the full reach of the
Commission’s jurisdiction pursuant to
section 215 of the FPA (the ‘‘gap’’ to
which the Staff Preliminary Assessment
referred), we agree with the commenters
that a wholesale substitution of one
term for another could lead to
unintended substantive changes within
certain Reliability Standards.
71. The Commission solicits comment
on this interpretation and whether the
Regional Entities should, in the future,
play a role in either defining the
facilities that are subject to a Reliability
Standard or be allowed to determine an
exception on a case-by-case basis.
64779
C. Mandatory Reliability Standards
1. Legal Standard for Approval of
Reliability Standards
72. Section 215(d)(2) of the FPA states
that the Commission may approve a
Reliability Standard if it determines that
a Reliability Standard is just,
reasonable, not unduly discriminatory
or preferential, and in the public
interest. In Order No. 672, the
Commission addressed issues regarding
the application of the statutory standard
in our review of a proposed Reliability
Standard. The Commission identified a
series of factors it would consider when
assessing whether to approve or remand
a Reliability Standard.57 Further, Order
No. 672 stated that the Commission
would, consistent with the statute, give
‘‘due weight’’ to the technical expertise
of the ERO with respect to the content
of a proposed Reliability Standard.
However, due weight does not equate to
a rebuttable presumption that a
proposed Reliability Standard meets the
statutory requirement of being just,
reasonable, not unduly discriminatory
or preferential, and in the public
interest.58 Further, the Commission
review of a proposed Reliability
Standard would balance any conflict
between a proposed Reliability Standard
and competition on a case-by-case
basis.59
73. NERC suggests that a proposed
Reliability Standard that has been
developed through its Reliability
Standards development process, which
has been certified by ANSI as being
open, inclusive, balanced and fair, is
assured to be ‘‘just, reasonable, and not
unduly discriminatory or
preferential.’’ 60 NERC also proposes 10
‘‘benchmarks’’ for evaluating a proposed
Reliability Standard that, according to
NERC, ‘‘may be helpful’’ to the
Commission in determining whether a
Reliability Standard is ‘‘just, reasonable
and not unduly discriminatory or
preferential’’ if due process provided by
the ANSI process alone does not
suffice.61 In addition, NERC suggests
that the Commission should consider
the benchmarks when determining
whether a proposed Reliability Standard
‘‘is in the public interest.’’
74. In Order No. 672, the Commission
rejected the notion that it would
57 Order No. 672 at P 262, 321–37.
58 Id. at P 345.
59 Id. at P 378.
60 NERC Petition at 6–8.
56 We note that the regional definitions have not
been submitted to us and we are not determining
the appropriateness of any regional definition in
this proceeding.
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61 Id. at 9–12. The benchmarks are: Applicability;
purpose; performance requirements; measurability;
technical basis in engineering and operations;
completeness; consequences for noncompliance;
clear language; practicality; and consistent
terminology.
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presume that a proposed Reliability
Standard developed through an ANSIcertified process automatically satisfies
the statutory standard of review.62
While an open and transparent process
certainly is extremely important to the
overall success of implementing section
215 of the FPA, an evaluation of any
proposed Reliability Standard must
focus primarily on matters of substance
rather than procedure. We will,
therefore, review each Reliability
Standard in addition to the process
through which it was approved by
NERC to ensure that the Reliability
Standard is just, reasonable, not unduly
discriminatory or preferential, and in
the public interest.
75. Likewise, with regard to NERC’s
benchmarks, we will not constrain
ourselves by approving or remanding a
proposed Reliability Standard based on
whether it satisfies the benchmarks. In
our order certifying NERC as the ERO,
we determined that the benchmarks and
other factors would be useful for the
ERO in developing proposed Reliability
Standards.63 The Commission did not
suggest that it would rely on the
benchmarks in its review of a proposed
Reliability Standard. Rather, as
discussed above, Order No. 672
identified factors that the Commission
will consider when determining
whether a proposed Reliability Standard
satisfies the statutory requirements.64
2. Commission Options When Acting on
a Reliability Standard
76. NERC recommends that the
Commission ‘‘conditionally approve’’
certain proposed Reliability Standards
that it believes satisfy the statutory
requirement but require improvement.65
The concept of conditional approval of
a Reliability Standard was discussed at
length in the July 6, 2006 technical
conference.66 Many commenters
responding to the Staff Preliminary
Assessment support some form of
conditional approval, while others
oppose the concept out of concern that
conditional approval will further
complicate the understanding of
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62 Order No. 672 at P 338.
63 ERO Certification Order, 116 FERC ¶ 61,062, at
P 241.
64 Order No. 672 at P 262, 321–37.
65 See NERC Petition at 109; NERC Comments at
14–19.
66 July 6, 2006 technical conference, Tr. at 14–47.
According to NERC, conditional approval means
that the Commission would approve the Reliability
Standards as mandatory and enforceable. In
enforcing conditional standards, NERC and the
Regional Entities would factor into the
determination of violations and the imposition of
penalties that certain requirements may be regional
‘‘fill-in-the-blank’’ requirements or may be missing
compliance information.
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mandatory Reliability Standards and
present a ‘‘moving target’’ because
NERC has proposed a plan to modify
numerous proposed Reliability
Standards before the Commission would
approve them in a final rule.
77. The Commission believes that
conditional approval may be a useful
procedural tool that it may want to use
when reviewing a Reliability Standard
proposed at some future date. However,
after careful consideration, the
Commission is not proposing to
conditionally approve any of the 107
Reliability Standards currently before
us. Rather, as reflected in our
substantive analysis of each Reliability
Standard, we will propose one of four
actions:
78. Approve: Approval is appropriate
for a proposed Reliability Standard that
the Commission determines to be ‘‘just,
reasonable, not unduly discriminatory
or preferential, and in the public
interest,’’ and as to which the
Commission has not identified any
additional issues that the ERO needs to
address at this time to improve the
Reliability Standard. Mandatory
compliance with the Reliability
Standard would be required as of the
effective date of the Final Rule. The
Commission has approved NERC’s plan
to review each Reliability Standard
within five years from the effective date
of the standard or its latest revision.
79. Approve as mandatory and
enforceable; and direct modification
pursuant to section 215(d)(5): The
Commission would take two separate
and distinct actions under the statute.
First, pursuant to section 215(d)(2) of
the FPA, the Commission would
approve a proposed Reliability
Standard, which would be mandatory
and enforceable upon the effective date
of the Final Rule. Second, the
Commission would direct NERC to
submit a modification of the Reliability
Standard to address specific issues or
concerns identified by the Commission
pursuant to section 215(d)(5) of the
FPA.67
80. This option is appropriate for a
large number of proposed Reliability
Standards where the Commission has
identified improvements which are
67 See ERO Certification Order at P 233, where the
Commission also noted that, if a Reliability
Standard is inadequate or has unintended
consequences, it may order the ERO to submit a
modification pursuant to section 215(d)(5) of the
FPA, 16 U.S.C. 824o(d)(5), which provides that
‘‘[t]he Commission * * * may order the Electric
Reliability Organization to submit to the
Commission a proposed reliability standard or
modification to a reliability standard that addresses
a specific matter if the Commission considers such
a new or modified reliability standard appropriate
to carry out this section.’’
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necessary or appropriate, but where the
proposed Reliability Standard
nonetheless satisfies the statutory
requirement that it be just, reasonable,
not unduly discriminatory or
preferential, and in the public interest.
This approach also allows us to give due
weight to the technical expertise of the
ERO in approving a Reliability
Standard, yet also provides a
mechanism to have the Commission’s
concerns addressed. Thus, where
appropriate, we propose to approve
these Reliability Standards as
mandatory and enforceable, and direct
modifications pursuant to section
215(d)(5). For these Reliability
Standards, we provide guidance with
regard to how and why they need to be
improved and may establish a deadline
by which a modification must be
resubmitted to the Commission.
81. Request additional information:
There are some Reliability Standards
that do not contain sufficient
information to enable us to propose a
disposition. For those Reliability
Standards, we will identify the
information that we require, and
propose not to approve or remand these
Reliability Standards until all the
relevant information is received. For
example, many of the fill-in-the-blank
Reliability Standards will not be
approved or remanded until the
Commission has received all the
necessary information. We may set a
deadline by which NERC must submit
the necessary information.
82. Remand: Remand is appropriate
for a proposed Reliability Standard that
does not satisfy the statutory criteria
that it be ‘‘just, reasonable, not unduly
discriminatory or preferential, and in
the public interest.’’ The Commission
may choose to set a deadline for NERC
to submit a modified Reliability
Standard.68 In the interim, the
remanded standard would not be
mandatory and enforceable. The
Commission will not hesitate to remand
a Reliability Standard that it finds does
not provide for an adequate level of
reliability.69
3. Prioritizing Modifications to
Reliability Standards
83. As discussed above, the
Commission is proposing to approve
certain Reliability Standards and, as a
separate action, is proposing to direct
the ERO to modify many of the same
Reliability Standards pursuant to
section 215(d)(5) of the FPA. The
68 See 18 CFR 39.5(g) (‘‘[t]he Commission, when
remanding a Reliability Standard * * * may order
a deadline by which the [ERO] must submit a * * *
modified Reliability Standard’’).
69 Order No. 672 at P 329.
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Commission recognizes that it is not
reasonable to expect the modification of
such a substantial number of Reliability
Standards in a short period of time.
Rather, the ERO will have to set
priorities regarding the order and timing
for developing modified Reliability
Standards and resubmitting them to the
Commission.
84. Many commenters recognize the
need for NERC to identify priorities in
terms of which Reliability Standards are
most critical to reliability and should be
revised immediately, and which are of
lesser priority. A number of
commenters, including WIRAB, suggest
detailed plans on how to set such
priorities, focusing primarily on
identifying those Reliability Standards
that are most critical to maintaining
reliability and those that are closest to
being ready for implementation.
Commenters suggest a staggered
schedule, some suggesting several years
for completion.
85. We propose that NERC first focus
its resources on modifying those
Reliability Standards that have the
largest impact on near term Bulk-Power
System reliability. Many of the
proposed modifications that reflect
Blackout Report recommendations fit
this description and should be a high
priority. The Commission has identified
a group of Reliability Standards that it
believes should be given the highest
priority by the ERO based on the above
guidance.70 However, this is not meant
to be an exclusive or inflexible list and
ERO and commenter input is welcome.
We propose that NERC address the
modifications we propose for these high
priority Reliability Standards within 1
year of the effective date of the Final
Rule.
86. In addition, we propose that NERC
address certain Reliability Standards
that are not necessarily identified above
as ‘‘high priority’’ may be modified in
a relatively short time frame where the
proposed modifications are relatively
minor or ‘‘administrative’’ in nature. We
believe that the ERO may complete such
modifications relatively quickly with
little diversion of ERO resources. Such
modifications may include a proposal to
modify a Reliability Standard to: (1)
Identify the ERO as the compliance
monitor rather than the regional
reliability organization; (2) include
Measures and Levels of Noncompliance; or (3) require other
relatively minor clarifications or
modifications.
87. While the Commission has
identified some modifications to
Reliability Standards that it believes
70 See Appendix D (High Priority List).
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would be appropriate for the ERO to
resubmit as high priority items, we
believe that it is important that the ERO
develop a detailed, comprehensive work
plan to address all of the modifications
that are directed pursuant to a final rule.
The work plan should take a staggered
approach and complete all the proposed
modifications either within two or three
years from the effective date of the final
rule.
88. The Commission believes that this
proposal strikes a reasonable balance
between the need to timely implement
identified improvements to the existing
Reliability Standards that will further
Bulk-Power System reliability and the
need for the ERO to develop
modifications with industry input using
its open, stakeholder process. The
Commission may use its authority,
pursuant to § 39.5(g) of the
Commission’s regulations, to set a
deadline for the ERO to submit a
modified Reliability Standard if the
Commission is not satisfied with the
time frame proposed by the ERO work
plan.
89. The Commission solicits comment
on its prioritization proposal.
4. Trial Period
90. A number of commenters favor a
phase-in of Reliability Standards with a
trial period, during which Reliability
Standards would be mandatory, but no
penalties would be assessed.71 Various
commenters suggest that the trial period
should last for a range of six months to
five years.
91. NERC, in its application for ERO
certification, proposed a six month
‘‘notice period’’ during which NERC
would determine ‘‘financial’’ penalties
and provide notice of the penalties to
violating entities, but would not collect
any penalties. NERC stated that it would
submit a report on the effectiveness of
the revised Sanction Guidelines to the
Commission by May 31, 2007. In the
ERO Certification Order, the
Commission rejected requests to
lengthen NERC’s proposed six-month
‘‘notice period’’ because it
‘‘appropriately balances the time needed
for NERC to implement the Sanction
Guidelines with the countervailing
interest in activating the mandatory
Compliance Enforcement program as
rapidly as possible.’’ 72
92. The Commission, however, is
increasingly concerned that a trial
period that commences with the
effective date of mandatory Reliability
71 See, e.g., Alberta, APPA, ISO/RTO Council,
PSEG, WIRAB and WECC.
72 ERO Certification Order, 116 FERC ¶ 61,062, at
P 462.
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64781
Standards may interfere with mandatory
and enforceable Reliability Standards
being in effect by next summer.
Moreover, the proposed Reliability
Standards have already been in effect
for a substantial period of time on a
voluntary basis. Thus, the Commission
proposes to eliminate a formal trial
period. Entities that have complied with
NERC’s standards on a voluntary basis
should be familiar with the proposed
mandatory Reliability Standards and
what is required for compliance.
Therefore, an extensive trial period is
unnecessary for such entities.
93. The Commission recognizes that
there are entities that have not
historically participated in the
voluntary system (including some
relatively small entities) that may not be
familiar with the proposed mandatory
Reliability Standards and what is
required for compliance. For such
entities, we propose that the ERO and
Regional Entities use their enforcement
discretion in imposing penalties on
such entities for the first six months the
Reliability Standards are in effect.
However, the Commission, the ERO,
and the Regional Entities would still
retain the authority to impose penalties
on such entities if warranted by the
circumstances.
5. International Coordination of
Remands
94. Canadian commenters, such as the
FPT Group, Alberta, CEA and Ontario
IESO, request that the Commission
affirm that it will seek to coordinate
with authorities in Canada prior to any
exercise of conditional approval,
remand or rejection of a proposed
Reliability Standard; and that each
existing NERC standard will retain its
present applicability until such time as
the Commission approves it as a
mandatory Reliability Standard.
95. The Commission has recognized
the importance of international
coordination in both Order No. 672 73
and the ERO Certification Order.74 In
the latter order, the Commission
directed NERC to revise its proposed
coordination process to: (1) Identify the
relevant regulatory bodies and their
respective standards approval and
remand processes that will be
implicated in any remand of a proposed
standard; and (2) specify actual steps to
coordinate all of these processing
requirements, including those that may
be necessary to expedite processing a
proposed Reliability Standard that must
be remanded. The Commission believes
73 See Order No. 672 at P 400.
74 ERO Certification Order, 116 FERC ¶ 61,062, at
P 286.
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that NERC’s development of a
coordination process, together with
existing means of communication and
coordination such as the U.S.—Canada
Bilateral Electric Reliability Oversight
Group, will provide the necessary
mechanisms for international
coordination.
sroberts on PROD1PC70 with PROPOSALS
D. Common Issues Pertaining to
Reliability Standards
96. As explained in the Staff
Preliminary Assessment,75 certain
issues are common to a number of
proposed Reliability Standards.
Immediately below, we discuss these
common issues, followed by a
discussion and determination of each
individual proposed Reliability
Standard.
1. Blackout Report Recommendations
97. As explained in the Staff
Preliminary Assessment, the Blackout
Report identified a number of factors
common to eight major blackouts
experienced in North America since
1965 and made 46 specific
recommendations to improve reliability
based on the lessons learned from the
August 2003 blackout and previous
blackouts. These included specific
recommendations to modify certain
existing Reliability Standards. While
recognizing the progress NERC has
made, the Staff Preliminary Assessment
also expressed concern that the
proposed Reliability Standards continue
to reflect several of the deficiencies
identified by the Blackout Report.
98. In its comments, NERC
emphasizes that implementation of the
Blackout Report recommendations has
been its top priority since August 2003
and describes the progress it has made
in addressing specific recommendations
and the status of ongoing work. It states
that some of the hardest work on issues
such as relay loadability and reactive
power require extensive investigation
before standards can be drafted. Other
commenters suggest that the Blackout
Report recommendations provide useful
direction for areas where the Reliability
Standards require modification and for
setting priorities when determining
which Reliability Standards to modify
first. A few commenters ‘‘downplayed’’
the significance of the Blackout Report,
noting that there is no statutory basis to
accept all the Task Force’s
recommendations as absolute, infallible
requirements and that not all
recommendations translate into
Reliability Standards.
99. The Commission believes that the
Blackout Report recommendations
address key issues for assuring BulkPower System reliability. The Blackout
Report recommendations were
developed by and have received
international support from both
industry and regulators in the United
States and Canada and we believe they
represent a well-reasoned and sound
basis for action. Further, the Blackout
Report recommendations address issues
that caused or contributed to not only
the August 2003 blackout, but multiple
blackouts over the past 20 years.76 Thus,
in the discussion of a particular
proposed Reliability Standard, we often
will recognize the merit of a specific
Blackout Report recommendation and
reaffirm the reasoning behind such
recommendation in proposing to
approve with a directive to modify a
specific Reliability Standard. Further,
we believe that a modification to a
proposed Reliability Standard that was
recommended in the Blackout Report
should receive the highest priority in
terms of NERC’s workplan to address
identified deficiencies.
100. The Commission believes that
prudent policy for Bulk-Power System
reliability is to have Reliability
Standards that are proactive. Such
Reliability Standards would require
actions be taken to prevent a blackout or
outage and not simply address the
undesirable outcomes. Therefore, it
must first and foremost address the
critical steps or actions that determine
the achievement of the outcome. This
proactive approach is necessary to
ensure that the responsible entity is
aware of and performs all of the
necessary steps to achieve the ultimate
reliability goal, rather than reacting to
the implications of not achieving the
outcome.
101. Our concern is illustrated by an
analogy provided by NERC in regard to
commercial airline maintenance.77 A
purely outcome-based standard on
maintenance would require zero plane
crashes due to failure of airplane
components. But the public interest
would not be well served if this were
the only standard because the
consequences of failing to meet the
standard are immediate and
unacceptable and provides no guidance
on how to achieve the goal. The public
interest dictates that there should be
standards on maintenance procedures,
frequency of testing and qualifications
of personnel conducting the
maintenance—not just a requirement
that there be no accidents. This same
concept applies to mandatory Reliability
76 Blackout Report at Chapter 10.
75 See Staff Preliminary Assessment at 17–26.
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77 NERC Comments at 40.
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Standards pertaining to the Bulk-Power
System.
102. Accordingly, the Commission
expects the ERO to include proactive
Requirements in the Reliability
Standards in addition to Requirements
that identify a specific outcome.
2. Measures and Levels of NonCompliance
103. As noted above, the uniform
format that NERC employs for each of
its proposed Reliability Standards
reflects five organizational elements:
Introduction, Requirements, Measures,
Compliance, and Regional Differences.
The Staff Preliminary Assessment stated
that 26 of the proposed Reliability
Standards do not contain Measures 78 or
Levels of Non-Compliance,79 or both.
The Staff Preliminary Assessment
emphasized that Reliability Standards
would be less subject to variable
implementation if they included the use
of performance metrics, where
applicable. The Staff Preliminary
Assessment assumed that metrics used
to determine non-compliance would be
included in the Measures similar to
BAL–001. NERC subsequently clarified
that such metrics are not intended to be
part of the Measure, but rather in the
Requirements.80
104. NERC, in its Petition, identified
21 Reliability Standards that lack
Measures or Levels of Non-Compliance
and indicated that it plans to file
modified Reliability Standards that
include the missing Measures and
Levels of Non-Compliance in November
2006. Further, NERC contends that a
Reliability Standard lacking Measures or
Levels of Non-Compliance is still
enforceable because the Measures
should be viewed as the process to
determine non-compliance during
audits and investigations. According to
NERC, the ‘‘Requirements’’ within a
Reliability Standard define what an
entity must do to be compliant and
establish an enforceable obligation, and
the presence or absence of Measures or
Levels of Non-Compliance should not
be the sole determining factor as to
whether a Reliability Standard meets
the statutory test for approval. Several
78 Although NERC does not formally define
‘‘Measures,’’ NERC explains that they ‘‘are the
evidence that must be presented to show
compliance’’ with a standard and ‘‘are not intended
to contain the quantitative metrics for determining
satisfactory performance.’’ NERC Comments at 104.
79 ‘‘Levels of Non-Compliance’’ are established
criteria for determining the severity of noncompliance with a Reliability Standard. The levels
of non-compliance range from Level 1 to Level 4,
with Level 4 being the most severe.
80 See NERC Comments at 105 (‘‘Metrics of
satisfactory performance are defined in the
requirements. * * *’’).
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commenters take the opposite view,
contending that Measures and Levels of
Non-Compliance are necessary to ensure
that a Reliability Standard is sufficiently
clear to be fairly enforced.81
105. We agree that it is important to
have Measures and Levels of NonCompliance specified for each
Reliability Standard, and recognize that
NERC has plans to provide many of
these elements in a November 2006
filing. However, the absence of these
two elements, which describe
approaches that will be used to assess
non-compliance, including the severity
of a violation for penalty settingpurposes, is not critical to our
determination of whether to approve a
proposed Reliability Standard. The most
critical element of a Reliability Standard
is the Requirements. As NERC explains,
‘‘the Requirements within a standard
define what an entity must do to be
compliant * * * [and] binds an entity
to certain obligations of performance
under section 215 of the FPA.’’ 82 If
properly drafted, a Reliability Standard
may be enforced in the absence of
specified Measures or Levels of NonCompliance.
106. While Measures and Levels of
Non-Compliance provide useful
guidance to the industry, compliance
will in all cases be measured by
determining whether a party met or
failed to meet the Requirement under
the specific facts and circumstances of
its use, ownership or operation of the
Bulk-Power System. Therefore, we
propose to approve a Reliability
Standard that lacks Measures or Levels
of Non-Compliance, or where these
elements contain ambiguities, provided
that the Requirement is sufficiently
clear and enforceable. Where a
Reliability Standard will be improved
by providing missing Measures or
Levels of Non-Compliance or by
clarifying ambiguities with respect to
Measures or Levels of Non-Compliance,
we propose to approve the Reliability
Standard and concurrently direct NERC
to modify the Reliability Standard
accordingly.
107. The common format of NERC’s
proposed Reliability Standards calls for
a ‘‘data retention’’ metric, generally in
the ‘‘Compliance’’ section of the
Reliability Standard. Yet, some
proposed Reliability Standards do not
contain a data retention requirement or
state positively that no record retention
period applies. The Commission seeks
comment on whether the retention time
periods specified in various Standards
81 See, e.g., National Grid and BPA.
82 NERC Comments at 104. See also NERC
Petition at 83.
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proposed by NERC are sufficient to
foster effective enforcement.83 The
Commission also seeks comment on
what, if any, additional records
retention requirements should be
established for the proposed Reliability
Standards.
3. Ambiguities and Potential Multiple
Interpretations
108. The Staff Preliminary
Assessment indicated that ‘‘various
elements of numerous standards appear
to be subject to multiple interpretations,
especially with regard to the lack of
specificity in the standards’
requirements, measurability, and
degrees of compliance.’’ 84 NERC agrees
that there are many areas in which the
Reliability Standards can be further
improved and states that it is committed
to review each Reliability Standard in
the next few years, based on priorities
coordinated with the Commission and
applicable authorities in Canada.85
NERC adds that, while there are
opportunities for improvement, the
existing Reliability Standards contain
the degree of clarity and specificity
required to meet the statutory test for
approval.
109. Many commenters agree
generally that ambiguities must be
removed and mandatory Reliability
Standards must be sufficiently clear
with regard to who is responsible and
what an entity must do to achieve
compliance.86 Some commenters insist
that a Reliability Standard should not go
into effect until this is achieved. WECC
and LPPC recommend that the
Commission require NERC to institute a
quality assurance program to ensure that
Reliability Standards are clear, concise,
and non-redundant.
110. Our review of the Reliability
Standards has confirmed staff’s concern
regarding the degree of ambiguity
contained in certain Measures and
Levels of Non-compliance portions of
the proposed Reliability Standards. We
83 Notably, the Commission elsewhere imposes
records retention requirements to facilitate effective
enforcement. For example, in Order No. 677, FERC
Stats. & Regs. 31,218 (2006), the Commission
amended 18 CFR parts 35 and 284 by extending
certain sellers’ record retention requirement from
three to five years so as to bring the record retention
requirement in line with the five year limitations
period applicable where the Commission might
seek to impose civil penalties for violations of the
anti-manipulation rule, 18 CFR part 1c. In the
reliability context, the civil penalty statute of
limitations period for both the Commission and
ERO and Regional Entities will also be five years.
See Order No. 672 at P 487.
84 Staff Preliminary Assessment at 18–19.
85 NERC Petition at 90–91; NERC Comments at
101–02.
86 See, e.g., LPPC, MISO, NEMA, SDG&E and
WECC.
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64783
are pleased that the ERO intends to
review each Reliability Standard to
identify and address ambiguous
Measures and Levels of NonCompliance language. While this is
important, it is essential that the
Requirements for each Reliability
Standard, in particular, are sufficiently
clear and not subject to multiple
interpretations. Where the Requirements
portion of a Reliability Standard is
sufficiently clear (and no other issues
have been identified), we propose to
approve the Reliability Standard.
111. In other cases, where some
ambiguity may exist but there is also a
common interpretation for certain terms
based on the best practices within the
industry, we propose to adopt that
interpretation in the NOPR. For
purposes of enforcement, the
Commission proposes to implement any
approved Reliability Standard
consistent with our interpretation of any
ambiguity as explained in the final rule.
In some cases, we propose to direct
NERC to supplement the language
pursuant to section 215(d)(5) of the
FPA.
112. In summary, the Commission
believes that a proposed Reliability
Standard that has Requirements that are
so ambiguous as to not be enforceable
should be remanded. A Reliability
Standard that has sufficiently clear
Requirements, Measures, and
Compliance language and is otherwise
just and reasonable should be approved.
A proposed Reliability Standard that
has sufficiently clear and enforceable
Requirements but Measures or Levels of
Non-Compliance that are ambiguous (or
none at all) should be approved in some
cases with a directive that the ERO
develop clear and objective Measures
and Compliance language.
4. Technical Adequacy
113. The Staff Preliminary
Assessment stated that the
Requirements specified in certain
Reliability Standards may not be
sufficient to ensure an adequate level of
reliability.87 Staff explained that, while
Order No. 672 noted that the ‘‘best
practice’’ may be an inappropriately
high standard, it also warned that a
‘‘lowest common denominator’’
approach is unacceptable if it is
insufficient to ensure system reliability.
114. NERC, EEI and others state that
NERC’s proposed Reliability Standards
are technically sound and that
compliance with them will assure
reliability. NERC contends that each
proposed Reliability Standard meets the
statutory test of providing an adequate
87 Staff Preliminary Assessment at 19.
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level of reliability for the Bulk-Power
System. Others share staff’s concern that
Reliability Standards not represent the
lowest common denominator.88 One
commenter suggested that there is a
tendency for a standard drafting team to
adopt a lowest common denominator
approach to achieve a consensus on a
standard.
115. We are cautious about drawing
any general conclusions about technical
adequacy as we consider this a matter
that can only be addressed on a
standard-by-standard basis. While we
are required under the statute to accord
due weight to the technical expertise of
the ERO, we are still required to
independently assess the technical
adequacy of any proposed Reliability
Standard. Where we have specific
concerns regarding whether a
Requirement set forth in a proposed
Reliability Standard may not be
sufficient to ensure an adequate level of
reliability or represents a ‘‘lowest
common denominator’’ approach, we
address those concerns in the context of
that particular Reliability Standard.
5. Fill-in-the-Blank Standards
116. Certain Reliability Standards
developed by NERC require the regional
reliability organizations to develop
criteria for use by users, owners, or
operators within the region. NERC refers
to these as ‘‘fill-in-the-blank
standards.’’ 89 NERC originally proposed
39 fill-in-the-blank standards, which it
said fell into three categories. The first
14 were Reliability Standards that
require a regional reliability
organization to set regional criteria or
develop a regional procedure.90 The
second group contained 10 Reliability
Standards that require the regional
reliability organization to develop such
criteria or procedures, and also require
entities within the region to follow
those procedures or criteria.91 The third
category consisted of 15 Reliability
Standards that require users, owners,
and operators to follow criteria or
procedures developed by the regional
reliability organization, but did not (in
the same Reliability Standard) require
the development of such criteria or
procedures.92 NERC indicated that the
88 See, e.g., NPCC, SDG&E and NYSRC.
sroberts on PROD1PC70 with PROPOSALS
89 See NERC Petition at 87–90.
90 EOP–007, IRO–001, MOD–003, MOD–011,
MOD–013, MOD–014, MOD–015, MOD–016, PRC–
002, PRC–003, PRC–006, PRC–012, PRC–013, and
PRC–014.
91 BAL–002, EOP–004, MOD–001, MOD–002,
MOD–004, MOD–005, MOD–008, MOD–009, MOD–
024, and MOD–025.
92 EOP–009, FAC–001, FAC–002, FAC–004,
MOD–010, MOD–012, MOD–017, MOD–019, PER–
002, PRC–004, PRC–007, PRC–008, PRC–009, PRC–
015, and PRC–016.
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first category did not pose a problem
because they were enforceable as
written. The issue with the remaining
25 Reliability Standards was whether
they could be enforced given that the
regional criteria and procedures were
not developed through an EROapproved process and were not
submitted to the Commission for
approval. NERC acknowledged that the
25 fill-in-the blank Reliability Standards
in categories two and three required
further evaluation and proposed
providing a work plan to the
Commission by November 8, 2006 with
a timetable for modifying, replacing, or
withdrawing these standards.93
117. The Staff Preliminary
Assessment recognized that the fill-inthe-blank standards raise two principal
concerns: (i) Some are not enforceable
against users, owners, and operators of
the Bulk-Power System, but rather only
provide broad direction to regional
reliability organizations, and (ii) the
specific implementing standards
adopted by the regional reliability
organizations have not undergone an
approval process under section 215 and,
thus cannot be enforced by the
Commission or the ERO.
118. In its June 26, 2006 comments to
the Staff Preliminary Assessment, NERC
amended its approach to the fill-in-theblank standards. It recommends
unconditional approval of the ‘‘category
one’’ Reliability Standards, which place
a requirement on a regional reliability
organization to set criteria or procedures
for reliability in the region, claiming
that they are really not fill-in-the-blank
standards. NERC then proposes to
divide the remaining fill-in-the-blank
standards into two new groups, the first
group consisting of 26 Reliability
Standards.94 The remaining group
consists of three fill-in-the-blank
standards that also are missing measures
or compliance elements.95 NERC
93 NERC Petition at 89.
94 This group includes 24 of the 25 standards
originally included in categories two and three,
plus two additional standards not originally
designated as fill-in-the-blank standards: BAL–002–
0, EOP–009–0, FAC–001–0, FAC–002–0, FAC–004–
0, MOD–001–0, MOD–002–0, MOD–004–0, MOD–
005–0, MOD–008–0, MOD–009–0, MOD–010–0,
MOD–012–0, MOD–017–0, MOD–019–9, MOD–
024–1, MOD–025–1, PER–002–0, PRC–004–1, PRC–
007–0, RPC–008–0, PRC–009–0, PRC–015–0, PRC–
016–0, TPL–002–0,* and TPL–004–0.* (* Newly
identified as fill-in-the-blank standards.)
95 EOP–004–0, EOP–006–0,* and IRO–005–1.*
(* Newly identified as fill-in-the-blank standards.)
NERC proposes that these 3 standards, along with
23 others that are missing measures or compliance
elements be conditionally approved with the
understanding that the missing measures and
compliance information will be filed in November
2006, after completion of stakeholder balloting in
September and NERC board voting on November 1,
2006.
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recommends conditional approval of
these 29 remaining fill-in-the-blank
standards.
119. Some commenters raised
concerns that the fill-in-the-blank
standards undermine uniformity, and
may exacerbate differences or seams
between the various ISO and RTO
control areas. Several commenters
support limited use of fill-in-the-blank
standards, noting that they provide
flexibility, which may facilitate
development of a Reliability Standard in
instances where a continent-wide
approach may not work.
120. NERC represents that it will
submit an action plan and schedule in
November 2006 for completing the fillin-the-blank standards. NERC expects
that it will take approximately three
years to complete the process, and will
be prioritizing Reliability Standards that
require the most immediate revision.96
NERC anticipates three potential
approaches to the fill-in-the-blank
standards: (1) If NERC determines that
there is insufficient justification for a
regional difference, it may replace a
Reliability Standard with a uniform
continent-wide Reliability Standard; (2)
where a regional difference is justified,
NERC proposes to direct the regions to
develop their regional criteria as a
Reliability Standard to be filed for
approval with the ERO and thereafter
with the Commission and applicable
authorities in Canada; (3) if mandatory
enforcement of a fill-in-the-blank
standard is not necessary for reliability,
NERC proposes to retire the Reliability
Standard and allow a region to maintain
voluntary criteria and procedures as
needed.
121. We share commenters’ concerns
regarding the potential for the fill-inthe-blank standards to undermine
uniformity. Order No. 672 stated that,
while uniformity is the goal with
respect to Reliability Standards, it may
not be achievable overnight. Where
NERC had directed the regions to
develop a particular Reliability
Standard, we noted that ‘‘[o]ver time,
we would expect that the regional
differences produced under this
framework will decline and a set of best
practices will develop.’’ 97 NERC’s
review states it will take uniformity
concerns into consideration, only
permitting regional differences where
justified. In Order No. 672, we specified
two instances where regional
differences may be permitted: regional
differences that are more stringent than
the continent-wide Reliability Standard,
including those addressing matters not
96 NERC Comments at 107.
97 Order No. 672 at P 292.
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addressed by a continent-wide
Reliability Standard, and regional
differences necessitated by a physical
difference in the Bulk-Power System.98
NERC’s review must be consistent with
these criteria.
122. In addition, if after an
appropriate review, NERC determines
that regional differences are still
warranted, we propose that any regional
proposal to fill-in-the-blank must be
developed in accordance with the
NERC’s ANSI-approved process, or
through an alternative process approved
by the ERO,99 and must be submitted to
the ERO and the Commission for
approval.
123. We propose to require
supplemental information regarding any
Reliability Standard that requires a
regional reliability organization to fill in
missing criteria or procedures. Where
important information has not been
provided to us to enable us to complete
our review, we are not in a position to
approve those Reliability Standards.
Therefore, we propose to not approve or
remand those Reliability Standards until
all the necessary information has been
provided.
E. Discussion of Each Individual
Reliability Standard
sroberts on PROD1PC70 with PROPOSALS
124. We have reviewed each of the
proposed Reliability Standards, and our
analysis is by chapter according to the
categories of Reliability Standards
defined in NERC’s petition. Each
chapter begins with an introduction to
the category, followed by a discussion of
each proposed Reliability Standard. The
discussion includes summaries of
NERC’s proposal, the Staff Preliminary
Assessment, and comments received, as
well as a Commission proposal. The
Commission proposal for each standard
will include a proposed disposition. For
Reliability Standards that are proposed
to be approved with direction that
NERC modify the Reliability Standard,
specific instructions are provided
regarding areas that need to be
modified, and how they should be
modified. Where additional information
is needed in order for the Commission
to propose a disposition, the
information required will be detailed.
98 Id. at P 291. Our position was reiterated in the
ERO Certification Order where we directed NERC
to delete additional criteria contained in its Rules
of Procedure and Reliability Standard development
procedures. ERO Certification Order, 116 FERC
¶ 61,062, at P 274.
99 NERC Rule of Procedure section 312.4 states
that regional Reliability Standards ‘‘may be
developed through the NERC reliability standards
development procedure, or alternatively, through a
regional reliability standards development
procedure that has been approved by NERC.’’
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1. BAL: Resource and Demand
Balancing
a. Overview of Category
125. The six Balancing (BAL)
Reliability Standards address balancing
resources and demand to maintain
interconnection frequency within
prescribed limits.
i. General Comments
126. LPPC comments generally that
each Requirement contained in a
Reliability Standard must be measurable
to be mandatory. In this regard, LPPC
identifies examples of Requirements in
the BAL Standards that it claims are not
measurable requirements but, rather,
descriptive or explanatory statements.
LPPC also identifies several
Requirements in the BAL Standards that
it claims are redundant to other
Requirements in the BAL Standards.
127. CenterPoint comments that
significant regional variation ‘‘is
necessary in matters such as amount
and composition of spinning reserve
and calculation of the Frequency Bias
component of ACE due to the different
operating characteristics of the
regions.’’ 100 CenterPoint suggests that
customers’ concerns are focused on
ensuring that a Reliability Standard’s
performance requirements are met as
opposed to concerns about specifically
how these requirements are met.
CenterPoint indicates that regional
variation in the method to comply with
the Reliability Standard is acceptable so
long as the Reliability Standard’s
required level of performance is
ultimately achieved. CenterPoint
suggests that certain process-oriented
Reliability Standards in this group
should be eliminated because other BAL
Reliability Standards already include
metrics necessary to determine
compliance.
ii. Commission Response
128. With respect to LPPC’s general
comments, the Commission agrees that
Reliability Standards must have clear
and enforceable Requirements. LPPC
correctly identifies a number of
instances in the BAL Reliability
Standards where a Requirement appears
to entirely consist of, or contain, an
explanatory statement rather than an
actionable Requirement. While the
Commission agrees with LPPC that
explanatory statements should not be in
the Requirements section of a Reliability
Standard, the presence of an
explanatory statement does not render
the Reliability Standard unenforceable.
The Commission has addressed the
100 CenterPoint Comments at 15.
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64785
redundant Requirements identified by
LPPC within the applicable Reliability
Standards below.
129. With respect to CenterPoint’s
comment, the Commission believes
there are certain processes, such as the
methods for calculating frequency bias,
which are accepted industry practices
and should be included as uniform
requirements in the Reliability
Standards. The Commission proposes to
formalize the process across the regions.
This will protect reliability by providing
a common basis for analysis and
corrective actions. CenterPoint also
comments that ‘‘some of the processoriented standards should be
eliminated,’’ but because CenterPoint
provided no further detail on this point,
the Commission is unable to fully
consider and respond to the comment.
b. Real Power Balancing Control
Performance (BAL–001–0)
i. NERC Proposal
130. The purpose of this Reliability
Standard is to maintain Interconnection
steady-state frequency within defined
limits by balancing real power demand
and supply in real-time. BAL–001–0
establishes two requirements that are
used to assess the proficiency of a
balancing authority to maintain
interconnection frequency by balancing
real power (MW) demand, interchange,
and supply. The proposed Reliability
Standard would apply to balancing
authorities.
ii. Staff Preliminary Assessment
131. Staff commented that
BAL–001–0 provides a good example of
performance metrics useful for assessing
the performance of Balancing
Authorities and compliance with the
standard.
iii. Comments
132. ReliabilityFirst agrees with staff’s
comments, and ISO/RTO Council
recommends that the Commission
accept this Reliability Standard.
133. LPPC asserts that Requirements
R1 and R2 are not actual Requirements
but instead only determine whether the
balancing authority has adequate
regulating reserves, without specifying a
performance metric.
iv. Commission Proposal
134. The Commission disagrees with
LPPC’s comment that Requirements R1
and R2 are not actual Requirements. To
the contrary, Requirements R1 and R2
state the bounds within which a
balancing authority must control its area
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control error (ACE).101 For example,
Requirement R2 requires each balancing
authority to operate such that its average
ACE for at least 90 percent of the time
is within a specific limit. These
Requirements set forth an effective
means for maintaining Interconnection
steady-state frequency errors that are
consistent with historic Interconnection
frequency performance, which is the
stated goal of BAL–001–0. These
Requirements also have associated
Measures and Levels of NonCompliance.
135. BAL–001–0 provides for an
important function necessary to
maintain Bulk-Power System reliability.
Further, the Commission agrees with
NERC’s proposed applicability of this
standard to balancing authorities.
136. For the reasons discussed above,
the Commission believes that Reliability
Standard BAL–001–0 is just, reasonable,
not unduly discriminatory or
preferential, and in the public interest;
and proposes to approve it as mandatory
and enforceable.
c. Regional Difference to BAL–001–0:
ERCOT Control Performance Standard 2
i. NERC Proposal
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137. NERC approved a regional
difference for ERCOT from Requirement
R2 in BAL–001–0, which requires that
the average area control error or ‘‘ACE’’
for each of the six ten-minute periods
during the hour must be within specific
limits, and that a balancing authority
achieve 90 percent compliance.102 This
Requirement is referred to as Control
Performance Standard 2 (CPS2). NERC
explains that ERCOT requested a waiver
of CPS2 because: (1) ERCOT, as single
control area 103 asynchronously
connected to the Eastern
Interconnection, cannot create
inadvertent flows or time errors in other
control areas; and (2) CPS2 may not be
feasible under ERCOT’s competitive
balancing energy market. In support of
this argument, ERCOT cites to a study
which it performed showing that under
the new market structure, the ten
101 NERC defines ACE as ‘‘The instantaneous
difference between a Balancing Authority’s net
actual and scheduled interchange, taking into
account the effects of frequency Bias and correction
for meter error.’’
102 Each regional difference approved by NERC is
provided as a separate ‘‘waiver request’’ document
that identifies the entity requesting a waiver, the
Reliability Standard or Requirements that are
waived, and explanation and a statement of NERC
approval. See NERC Petition, Exhibit A. In addition,
each regional difference is identified in the
Reliability Standard to which the waiver applies.
103 At the time NERC granted this regional
difference, the term ‘‘control area’’ was used instead
of ‘‘balancing authority.’’ For purposes of this
discussion, they are the same.
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control areas in its region were able to
meet CPS2 standards while the
aggregate performance of the ten control
areas was not in compliance.
ii. Staff Preliminary Assessment
138. This regional difference was not
addressed in the Staff Preliminary
Assessment.
iii. Comments
139. There were no comments
regarding this regional difference.
iv. Commission Proposal
140. Order No. 672 explains that
‘‘uniformity of Reliability Standards
should be the goal and the practice, the
rule rather than the exception.’’ 104
However, the Commission has stated
that, as a general matter, regional
differences are permissible if they are
either more stringent than the continentwide Reliability Standard, or if they are
necessitated by a physical difference in
the Bulk-Power System.105 Regional
differences must still be just, reasonable,
not unduly discriminatory or
preferential and in the public
interest.106
141. ERCOT’s Protocols concerning
frequency control identify that the
existing ERCOT approach to
Interconnection frequency control is
necessary to assure reliability in that
interconnection.107 However, the
existing waiver was filed prior to the
formation of these procedures. ERCOT
is both a single balancing authority and
the smallest of the three
Interconnections, approximately one
tenth of the size of the Eastern
Interconnection. As such, frequency
control is more critical to its system
reliability.108
142. The Commission notes that the
physical difference of ERCOT compared
to the other two interconnections in
terms of size is a sufficient reason for
approving a regional difference. Also,
ERCOT’s approach of determining the
minimum frequency response needed
for reliability and requiring appropriate
generators to have specific governor
droop appears to be a more stringent
practice than Requirement R2 in BAL–
104 Order No. 672 at P 290.
105 Id. at P 291.
106 Id.
107 See ERCOT Protocols, section 5 (Dispatch) at
21–23 (May 1, 2006), available at: http://
www.ercot.com/mktrules/protocols/current.html.
108 The minimum frequency response as
calculated by ERCOT for reliable operation is 420
MW/0.1 Hz, while the measured frequency
response for the Eastern Interconnection is
approximately 3,000 MW/0.1 Hz. ERCOT has a
requirement for a minimum frequency bias that is
almost twice that of the Eastern Interconnection
taken on the same total load basis.
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001–0. The calculation of the required
frequency response will be discussed in
BAL–002. However, neither reason is
articulated in the proposed regional
difference.
143. The Commission proposes to
approve the ERCOT regional difference.
However, the Commission proposes to
have the ERO submit a modification of
the ERCOT regional difference to
include the requirements concerning
frequency response contained in the
ERCOT Protocols, section 5.
d. Disturbance Control Performance
(BAL–002–0)
i. NERC Proposal
144. The reliability goal of this
Reliability Standard is to utilize
contingency reserves to balance
resources and demand to return
interconnection frequency to within
defined limits following a reportable
disturbance. BAL–002–0 establishes:
(1) The generic requirements that each
regional reliability organization should
use to determine the amount and type
of contingency reserves that will be
needed to meet a metric called the
Disturbance Control Standard (DCS); (2)
how to calculate the DCS metric; (3)
procedures to be used in calculating
DCS for reserve sharing groups; (4) a 15
minute default disturbance recovery
period; (5) a 90 minute default
contingency reserve restoration period;
and (6) the requirement that balancing
authorities have access to contingency
reserves to respond to loss of generation,
but not loss of load. The proposed
Reliability Standard would apply to
balancing authorities, reserve sharing
groups,109 and regional reliability
organizations.
ii. Staff Preliminary Assessment
145. Requirement R3.1 requires that a
balancing authority or reserve sharing
group carry ‘‘at least enough
contingency reserves to cover the most
severe single contingency.’’ Staff noted
that the Requirement could be subject to
multiple interpretations, one limited to
only the loss of generation, whereas the
other considers the loss of supply
resulting from a transmission or
generation contingency.110 Further staff
noted that specific requirements related
to the composition of reserves and the
restoration time are left to Regions and
sub-Regions to determine. For example,
Requirement R2 directs each regional
reliability organization (or sub-regional
109 A ‘‘reserve sharing group’’ is a group of two
or more balancing authorities that collectively
maintain, allocate and supply operating reserves.
See NERC glossary at 12.
110 Staff Preliminary Assessment at 30.
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reliability organization or reserve
sharing group) to specify its contingency
reserve policies, including minimum
reserve requirements and allocation and
the permissible mix of reserves. Other
provisions identified by staff as vague or
missing include the definition as to
which resources and demand side
management are eligible to be counted
as spinning reserves. Finally, staff stated
that lower reporting thresholds for the
size of the minimum disturbance, which
may be required by certain regional
reliability organizations, should be
documented as a regional difference.
iii. Comments
146. NERC states that, with regard to
contingency reserves, the BAL–002–0
requirement that a balancing authority
restore its resource-demand balance
with the rest of the Interconnection
within 15 minutes is absolute, objective
and measurable. To meet this
requirement, the balancing authority
must have available sufficient reserves
to recover from the largest single
contingency and deploy those reserves
within 15 minutes. It states that
‘‘leaning on the system’’ for up to 15
minutes is an appropriate use of the
Interconnection. Thus, with regard to
staff’s comments that the Reliability
Standard does not specify minimum
reserve requirements and that the
appropriate mix of reserves is not
defined, NERC questions whether it is
appropriate to measure the desired
outcome (as BAL–002–0 does), or how
that outcome is achieved (as staff
suggests). NERC suggests that the
existing approach is more appropriate
because the ‘‘how’’ portion is driven by
system design, resource mix and
economics. Further, it adds that regional
variation is appropriate in determining
the amount of contingency reserves
because it is driven by the specific
system configuration and operating
conditions; and adding greater
specificity to the contingency reserve
requirements to achieve uniformity will
not enhance reliability but will likely
increase costs of compliance. NERC
states that it will review the potential
reliability benefits and costs associated
with more specific and uniform
contingency reserve requirements.
147. Many commenters agree with the
Staff Preliminary Assessment that BAL–
002–0 lacks specificity in certain areas.
Most commenters also argue in favor of
giving deference to regions or reserve
sharing groups with regard to the
requirements in Requirement R2 and
certain other requirements of the
standard. CPUC states that the
corresponding WECC standards provide
specificity in areas identified by staff
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and provide for a more stringent
disturbance reporting threshold. It
suggests that the Commission defer to
and approve such regional standards
already in place that correspond to
NERC-proposed Reliability Standards,
but add specificity and stringency
without triggering a need for the
regional reliability organization to
provide extensive justification for a
‘‘regional difference.’’ ISO/RTO Council
states that ‘‘the requirements to recover
the loss of generation and returning
Area Control Error to a specified value
within a specific time period as
stipulated in the standard provide the
needed reliability performance
yardstick.’’ 111 It continues, stating that
once these performance-based
requirements are in place, the regional
reliability organization standards can
provide the supplementary process
requirements. MidAmerican advocates
that the appropriate reserve sharing
group should specify requirements for
contingency reserves, while CenterPoint
states that a significant amount of
regional variation is necessary.
ReliabilityFirst believes that NERC
should provide a clear definition of
spinning reserves for Interconnections.
148. MidAmerican suggests that there
should be specific requirements such as
the percentage of reserves to load, the
permissible mix of spinning reserves
verses non-spinning generation to meet
operating reserves, the maximum
allowable interruptible load, and other
pool rules. These requirements should
be based on composite reliability
studies such as a Loss-of-Load
Expectation (LOLE) 112 in the
Interconnection. It also states that BAL–
002–0 should contain a planning reserve
requirement 113 based on LOLE.
MidAmerican suggests that BAL–002–0
should allow for differing regional
reserve requirements due to differing
generation mixes in each region.
149. ReliabilityFirst agrees with staff’s
assessment. It comments that the loss of
supply is another contingency and
suggests that the Reliability Standard
should further define the criteria for
contingencies and state the requirement
for all types of contingencies to be
assessed during recovery from a
111 ISO–RTO Council Comments, Attachment A
at 3.
112 LOLE studies are probabilistic studies
associated with determining the probability that
there may not be sufficient generation to supply
firm load.
113 Contingency reserves are those reserves used
during real time operation to accommodate
uncertainties in generation failures. In contrast,
planning reserves have a long-term perspective.
While BAL–002–0 has a requirement pertaining to
contingency reserve policy, the Reliability
Standards are silent on planning reserve.
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64787
disturbance. ReliabilityFirst also agrees
that lower thresholds should be defined
as regional differences but any
difference should be demonstrated as
technically defensible and warranted.
ReliabilityFirst agrees with the Staff
Preliminary Assessment that the
procedures developed by the individual
regions to determine contingency
reserves need to be merged to develop
consistency.
150. LPPC points out several
Requirements it considers problematic.
It states that Requirement R4.1 is not a
requirement but rather a definition of
some of the criteria for disturbance
recovery. It further states that the
statement in Requirement R4.1, is only
true if the balancing authority is not
utilizing a reserve sharing group to
respond to the event, and the definition
should be expanded to include reserve
sharing groups. LPPC suggests that there
is some redundancy between
Requirements R4 and R5 and that they
could be combined. Specifically, LPPC
suggests that the first sentence of each
Requirement is essentially stating the
same thing. It also states the reference
to the NERC Operating Committee
should be removed from Requirements
R4.2 and R6.2.
iv. Commission Proposal
151. The Commission proposes to
approve BAL–002–0 as mandatory and
enforceable. In addition, we propose to
direct that NERC develop modifications
to the Reliability Standard as discussed
below.
152. The issues identified by the
commenters and staff can be grouped
into three categories: (1) The
measurement of the performance of the
contingency reserves through
Disturbance Control Standard; (2) the
determination of the amount and
makeup of contingency reserves; and (3)
what contingencies are appropriate to
consider.
(a) Disturbance Control Standard
153. NERC contends that this
standard is ‘‘absolute, objective, and
measurable’’ in that it allows up to 15
minutes for the recovery from a
disturbance.114 The Commission agrees
with allowing up to 15 minutes for
recovery from a disturbance. To achieve
NERC’s measurement approach, we
propose that NERC modify Requirement
R3.1, which currently requires that a
balancing authority carry at least
enough contingency reserve to cover
‘‘the most severe single contingency,’’ to
include enough contingency reserve to
cover any event or single contingency,
114 NERC Comments at 41.
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including a transmission outage, which
results in a significant deviation in
frequency from the loss or mismatch of
supply either from local generation or
imports.115 We believe that this
approach would address staff’s concern
with Requirement R3.1 while giving due
weight to the ERO’s position. Further,
NERC should consider whether a
frequency deviation of 20 milli Hertz
lasting longer than the 15 minute
recovery period should be used to
define a significant deviation in
frequency. The Commission is aware
that this approach is consistent with the
Balancing Authority ACE Limit (BAAL)
presently being field tested. The major
difference between the proposal and the
BAAL is that the proposal is aimed at
preserving the historic frequency
performance of the system.
154. The Commission agrees with
ReliabilityFirst that lower reporting
thresholds for the size of the minimum
disturbance should be defined as a
regional difference. However, the above
approach eliminates that concern
because any event or single contingency
that causes a frequency deviation above
the defined threshold would be
included in the DCS calculation.
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(b) Determination of Amount and
Makeup of Contingency Reserves
155. The Commission notes that
Requirement R2 of BAL–002–0 is a ‘‘fillin-the-blank’’ requirement, as it directs
each regional reliability organization (or
sub-regional reliability organization or
reserve sharing group) to specify its
contingency reserve policies, including
minimum reserve requirements and
allocation and the permissible mix of
reserves. NERC and many other
commenters state that the regional
determination of contingency reserves is
appropriate.
156. While the Commission believes it
is appropriate for balancing authorities
to have different amounts of
contingency reserves, these amounts
should be based on one uniform
continent-wide contingency reserves
policy. The policy should be based on
the reliability risk of not meeting load
associated with a particular balancing
authority’s generation mix and topology.
The appropriate mix of operating
reserves, spinning reserves and nonspinning reserves should be addressed
on a consistent basis. As identified by
115 Although Frequency Response and Bias are
discussed at length in Reliability Standard BAL–
003–0, the Commission notes here that it is
important that contingency reserves should have
adequate frequency response to ensure recovery
immediately following an event.
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the ERCOT and WECC whitepapers,116
due consideration should be given to
the amount of frequency response from
generation or load needed to assure
reliability. We propose that this policy
be neutral as to the source of the
contingency reserves in terms of
ownership or technology. Accordingly,
the Commission proposes to require
NERC to develop a continent-wide
contingency reserve policy.
157. As identified in the Staff
Preliminary Assessment, the types of
resources that can be used for
contingency reserves should be
consistent across the country and not
have some regions allow the curtailment
of irrigation pumps (one form of DSM)
to be used as part of contingency
reserves while other regions do not.117
Demand Side Management or Direct
Control Load Management should be on
the same basis as conventional
generation or any other technology.
Accordingly, the Commission proposes
to direct NERC to modify BAL–002–0 to
include a Requirement that explicitly
allows demand side management as a
resource for contingency reserves.
158. With regard to MidAmerican’s
suggestion that the BAL–002–0
Reliability Standard should contain a
planning reserve requirement based on
LOLE, the Commission disagrees noting
that BAL–002–0 deals with operating
reserves and not planning reserves.
(c) Contingencies
159. Staff’s concern regarding
transmission contingencies is resolved
by the above approach in measuring
response for frequency deviation.
160. With regard to LPPC’s concerns,
the Commission disagrees with its
suggestion that the applicability of
Requirement R4.1 should be extended to
reserve sharing groups, noting that
reserve sharing groups typically do not
calculate a combined ACE. With regard
to LPPC’s comment regarding the
redundancy of R4 and R5 and the
suggestion that these requirements be
combined, we leave that to the
discretion of the ERO.
161. We agree with LPPC’s suggestion
to modify Requirements R4.2 and 6.2 of
BAL–002 to replace references to the
116 See WECC Frequency Response Standard
White Paper (2005), available at http://
www.wecc.biz/documents/library/RITF/
FRR_White_Paper_v12_1–27–06.pdf; ERCOT Energy
Market Technical Paper 1C, Defining, Measuring
and Valuing Frequency Response (January 2004).
117 See also Assessment of Demand Response and
Advanced Metering: Staff Report (Aug. 2006)
(Demand Response Report), available at http://
www.ferc.gov/legal/ staff-reports/demandresponse.pdf.
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NERC Operating Committee with the
ERO.118
162. While the Commission has
identified concerns with regard to BAL–
002–0, we believe that the proposal
serves an important purpose in ensuring
a balancing authority is able to utilize
its contingency reserves to balance
resources and demand and return
interconnection frequency within
defined limits following a reportable
disturbance. Further, the proposed
Requirements set forth in BAL–002–0
are sufficiently clear and objective to
provide guidance for compliance.
163. Accordingly, giving due weight
to the technical expertise of the ERO
and with the expectation that the
Reliability Standard will accomplish the
purpose represented to the Commission
by the ERO and that it will improve the
reliability of the nation’s Bulk-Power
System, the Commission proposes to
approve Reliability Standard
BAL–002–0 as mandatory and
enforceable. In addition, pursuant to
section 215(d)(5) of the FPA and
§ 39.5(f) of our regulations, the
Commission proposes to direct that
NERC submit, a modification to BAL–
002–0 that: (1) Includes a Requirement
that explicitly allows demand side
management as a resource for
contingency reserves; (2) develop a
continent-wide contingency reserve
policy; 119 (3) includes a Requirement
that measures response for any event or
contingency that causes a frequency
deviation; (4) substitutes ERO for
regional reliability organization as the
compliance monitor; 120 and (5) change
references to the NERC Operating
Committee in Requirements R4.2 and
R6.2 to ERO.
e. Frequency Response and Bias
(BAL–003–0)
i. NERC Proposal
164. The purpose of BAL–003–0 is to
ensure that a balancing authority’s
frequency bias setting 121 is accurately
118 LPPC raises the same concern regarding
references to the NERC Operating Committee in
other Reliability Standards. We agree that the term
should be removed and replaced with the term ERO
in all such places.
119 This could be accomplished by modifying
Requirement R2 or developing a new Reliability
Standard.
120 The proposal to require that the ERO be
identified as the compliance monitor (which may
then choose to delegate compliance monitor
responsibility to a Regional Entity) applies to each
Reliability Standard that currently identifies the
regional reliability organization as the compliance
monitor. However, we will not repeat this proposal
throughout the NOPR.
121 Frequency bias setting is a value expressed in
MW/0.1 Hz, set into a balancing authority ACE
algorithm that allows the balancing authority to
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calculated to match its actual frequency
response.122 Among other things, BAL–
003–0 establishes: (1) A Requirement for
balancing authorities to review their
frequency bias calculation on an annual
basis to reflect any changes in their
frequency response and to update the
frequency bias to reflect changes to any
factors used in the calculation, and to
report frequency bias setting and
methodology used to the NERC
Operating Committee; (2) general
Requirements on how balancing
authorities should calculate frequency
bias, including which factors or
parameters to include in the calculation;
(3) a Requirement which establishes a
default frequency bias setting of 1
percent of yearly peak demand per 0.1
Hz for balancing authorities that serve
native load; and (4) for balancing
authorities that do not serve native load,
a Requirement which establishes a
default frequency bias setting of 1
percent of its estimated maximum
generation level in the coming year per
0.1 Hz. The proposed Reliability
Standard would apply to balancing
authorities.
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ii. Staff Preliminary Assessment
165. Staff raised the concern that use
of a frequency bias setting that is
different from the natural frequency
response of the balancing authority’s
area could result in less control actions
than are appropriate to preserve system
reliability.123 In addition, staff noted
that several metrics, such as ACE, CPS1,
and CPS2, use frequency bias setting as
an input and the use of an incorrect
value of frequency bias setting would
result in incorrect measurement of
actual performance with respect to ACE,
CPS1, and CPS2.
166. Staff noted that BAL–003–0 does
not specify the actual minimum
frequency response needed for reliable
operation and how the frequency
response should vary with the types of
generation used to ensure that all types
of generators are contributing their share
of frequency response to assure the
reliability of the Bulk-Power System.124
Further, staff expressed concern that
data from actual events show that the
natural frequency response for Eastern
contribute its frequency response to the
Interconnection. See NERC glossary at 5.
122 The actual frequency response is the increase
in output from generators after loss of a generator
and determines the frequency at which generation
and load come in balance again.
123 Staff Preliminary Assessment at 28–30.
124 For example, certain generating units such as
combined cycle units are not capable of increasing
their output to restore the frequency back to 60 Hz
and, in fact, their frequency responses tend to be
opposite of what is required and thus aggravate a
situation even further.
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and Western Interconnections have been
declining every year for the past
decade.125 NERC’s Frequency Response
White Paper discusses these issues in
detail.
167. Staff noted that BAL–003–0 does
not include Levels of Non-Compliance
and has only one Measure. Staff pointed
out limitations in the single Measure
contained in BAL–003–0, which
requires balancing authorities to
conduct frequency response surveys
only when NERC specifically requests
that such surveys be performed.
iii. Comments
168. NERC states that it is important
to distinguish between frequency bias
and frequency response. With regard to
the use of a frequency bias setting that
is different from actual frequency
response, NERC states that BAL–003–0
allows a balancing authority to set its
frequency bias setting to match its
actual frequency response. For some
balancing authorities that are unable to
calculate their frequency response
dynamically, BAL–003–0 establishes a
minimum of 1 percent of the balancing
authority’s peak demand to ensure
sufficient frequency response from its
generators. Southern states that the sum
of frequency bias setting for all of the
balancing authorities in the Eastern
Interconnection is 6,700 MW/0.1 Hz,
whereas the actual frequency response
is 2,800 MW/0.1 Hz. In sum, it claims
that the Eastern Interconnection is overbiased by a factor of 2.4 and the matter
of frequency bias setting should not be
taken lightly.
169. ReliabilityFirst agrees with staff
that use of an inappropriate frequency
bias setting may have an adverse impact
on reliability and adds that this should
be addressed by a team of experts.
ReliabilityFirst also states that the
Reliability Standard should include
Levels of Non-Compliance. It states that,
although the referenced surveys are
intended to monitor deviations in
frequency response, the survey should
be used more regularly. In addition,
ReliabilityFirst and CenterPoint state
that it is appropriate to allow balancing
authorities to continue to define their
own methodology for calculating
frequency bias setting.
170. Southern expresses concern
regarding staff’s statement that ‘‘the
frequency response of both the Eastern
and Western Interconnections has
decreased over the last 10 years’’ 126 and
asserts that the Eastern Interconnection
125 According to NERC’s Frequency Response
White Paper (dated April 6, 2004), the frequency
response in the Eastern Interconnection has
declined at a rate of 70 MW/0.1 Hz annually.
126 Staff Preliminary Assessment at 28.
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64789
frequency bias setting is actually overbiased. In particular, Southern states
that the NERC Operating Committee
purposely chose to over-bias the
frequency bias setting of the
interconnections when it established the
1 percent floor and that the Eastern
Interconnection frequency bias setting is
currently over-biased by a factor of 2.4.
Southern believes that some
clarification and industry feedback may
be useful in considering issues and
concerns raised by staff with regard to
frequency bias and the way it is used to
maintain reliability.
iv. Commission Proposal
171. The Commission proposes to
approve BAL–003–0 as mandatory and
enforceable. In addition, we propose to
direct that NERC develop modifications
to the Reliability Standard as discussed
below.
172. NERC claims that BAL–003–0
allows a balancing authority to set its
frequency bias setting to match its
actual frequency response. Similarly,
NERC’s Petition describes the reliability
goal of BAL–003–0 is to: ‘‘maintain
interconnection frequency by * * *
ensuring that the balancing authority’s
frequency bias setting is appropriately
matched to its actual frequency
response (governor plus load
response).’’ However, Southern asserts
that the Eastern Interconnection is overbiased. The Commission agrees that the
frequency bias setting at peak, as
compared to the actual frequency
response of the system, is larger. The
Commission is concerned that overbiasing is an approach to compensate
for the low or no actual frequency
response from some balancing
authorities. In addition, Southern’s
assertion that the system is over-biased
is inconsistent with NERC’s stated
reliability goal and highlights staff’s
concern that data from actual events
suggest an overall decline in the actual
frequency response in the Eastern and
Western Interconnection.
173. In response to ReliabilityFirst
and CenterPoint, the Commission notes
that the Requirement R2 of BAL–003–0
allows balancing authorities to choose a
methodology for calculating frequency
bias setting from at least two different
ways. In addition, Requirement R2
requires that each balancing authority
shall establish its frequency bias setting
that is as close as practical to, or greater
than, its actual frequency response.
174. In addition, the Commission
notes that BAL–003–0 addresses
frequency response only during normal
conditions and does not establish the
frequency bias setting that will be
required during an emergency, black
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sroberts on PROD1PC70 with PROPOSALS
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Federal Register / Vol. 71, No. 213 / Friday, November 3, 2006 / Proposed Rules
start or system restoration using
‘‘islanding’’ schemes. Without proper
frequency response, restoration of an
isolated area using black start generation
will be very difficult. Moreover,
‘‘islanding’’ schemes used in some areas
of the country may not be stable without
proper frequency response. The
Commission is aware that WECC is
addressing the need for proper
frequency response during all operating
conditions, including emergencies, and
that ERCOT has a procedure in place.127
175. Therefore, the Commission
invites comments whether BAL–003–0
appropriately addresses frequency bias
setting during normal as well as
emergency conditions and should a
requirement be added for balancing
authorities to calculate the frequency
response necessary for reliability in
each of the interconnections and
identify a method of obtaining that
frequency response from a combination
of generation and load resources.
176. Further, the surveys mentioned
in Measure M1 are only conducted
when NERC requests such surveys. The
Commission proposes that yearly
surveys should be performed to
compare the calculated frequency bias
values against actual frequency response
to refine the balancing authorities’
frequency bias setting. While the
Commission has identified concerns
with regard to BAL–003–0, we believe
that the Reliability Standard serves an
important purpose in ensuring that
balancing authorities accurately
calculate their frequency bias setting to
match their frequency response. While
we have proposed a number of
improvements to the Reliability
Standard, we nonetheless, believe that
the proposed Requirements set forth in
BAL–003–0 are sufficiently clear and
objective to provide guidance for
compliance.
177. Accordingly, giving due weight
to the technical expertise of the ERO
and with the expectation that the
Reliability Standard will accomplish the
purpose represented to the Commission
by the ERO and that it will improve the
reliability of the nation’s Bulk-Power
System, the Commission proposes to
approve Reliability Standard BAL–003–
0 as mandatory and enforceable. In
addition, pursuant to section 215(d)(5)
of the FPA and § 39.5(f) of our
regulations, the Commission proposes to
direct that NERC submit a modification
to BAL–003–0 that (1) includes Levels
127 See WECC’s Frequency Response Standard
White Paper (2005), at http://www.wecc.biz/
documents /library/RITF /FRR_White_Paper_
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of Non-Compliance and (2) modifies
Measure M1 to include yearly surveys.
f. Time Error Correction (BAL–004–0)
i. NERC Proposal
178. The purpose of BAL–004–0 is to
ensure that time error corrections are
conducted in a manner that does not
adversely affect the reliability of the
Interconnection.128 The Reliability
Standard requires that: (1) Only a
reliability coordinator is eligible to serve
as time monitor and that the NERC
Operating Committee shall designate a
single reliability coordinator in each
Interconnection to serve as time monitor
for that Interconnection; (2) the time
monitor shall monitor time error and
initiate and terminate all corrective
action orders in accordance with the
North American Energy Standards
Board (NAESB) Time Error Correction
Procedure; (3) each balancing authority
shall participate in time error
corrections; and (4) any reliability
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